Abstract
This study used flexible leadership theory (FLT) as a basis to examine the extent to which a firm’s long-term financial prosperity depends on three performance determinants: human capital, efficiency, and innovative adaptation. Based on FLT predictions, we expected that the effect of human capital on firm performance would be mediated by efficiency and innovative adaptation. We compared the theoretical model with two alternative models using structural equation modeling. The sample involved 104 Fortune 500 firms across 15 industries over a 10-year period. Information on financial indicators was obtained from the Research Insight database (Compustat), and ratings of human capital talent were obtained from a Fortune data set (America’s Most Admired Companies). Results indicated that the effects of human capital on long-term financial performance were partially mediated by efficiency and innovative adaptation.
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