Human resource practices and organizational human capital in the family firm: The effect of generational stage

Abstract

Organizational human capital (OHC) is considered a source of sustainable competitive advantage. However, research has scarcely analyzed what drives its development in family firms. We analyze the effect of formal human resource (HR) practices for family and non-family employees—namely, skill-enhancing practices (entry requirements and training programs) and motivational practices (internal promotion systems and compensation and incentive plans)—on family firms' OHC. Further, generational stage is one important source of heterogeneity among family firms. We contribute to the literature on heterogeneity among family firms by testing the moderating role of generational stage in the relationship between HR practices and OHC. We analyze 707 unlisted Spanish family firms and conclude that both family and non-family employees' skill- and motivation-enhancing practices have a positive effect on their OHC. Our results also show that the positive influence of motivational HR practices for family employees on OHC is more intense as generations advance.