Measuring the impact of innovative human capital on small firms’ propensity to innovate

Helen Mcguirk,Helena Lenihan,Mark Hart

doi:10.1016/j.respol.2014.11.008

Helen Mcguirk, Helena Lenihan + Show 1 more

Open Access

https://doi.org/10.1016/j.respol.2014.11.008

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Journal: Research Policy	Publication Date: Dec 5, 2014
Citations: 262	License type: cc-by

Affiliation: University of Limerick, Aston University

Abstract

The ability to identify and evaluate the competitive advantage of employees’ transferable and innovative characteristics is of importance to firms and policymakers. This research extends the standard measure of human capital by developing a unique and far reaching concept of Innovative Human Capital and emphasises its effect on small firm innovation and hence growth (jobs, sales and productivity). This new Innovative Human Capital concept encapsulates four elements: education, training, willingness to change in the workplace and job satisfaction to overcome the limitations of measurements used previously. An augmented innovation production function is used to test the hypothesis that small firms who employ managers with Innovative Human Capital are more likely to innovate. There is evidence from the results that Innovative Human Capital may be more valuable to small firms (i.e. less than 50 employees) than larger-sized firms (i.e. more than 50 employees). The research expands innovation theory to include the concept of Innovative Human Capital as a competitive advantage and determinant of small firm innovation; and distinguishes Innovative Human Capital as a significant concept to consider when creating public support programmes for small firms.

Highlights

Innovation plays an important role in firms’ survival (Cefis and Marsili, 2006) and is generally defined as the commercial application of new knowledge and the implementation of ideas
Human capital provides a competitive advantage for firms in terms of skills, expertise and their willingness to work (Hewitt-Dundas, 2006)
Blundell et al (1999) found that highly educated and highly-skilled workers adapted rapidly and efficiently to new tasks, providing a direct source of innovation. To encapsulate both the education element of a new Innovative Human Capital (IHC) concept and capture firm size, we present two hypotheses5: the first hypothesis is formulated for small firms and the second is formulated for larger-sized firms, : H1(s)

Summary

Introduction

Innovation plays an important role in firms’ survival (Cefis and Marsili, 2006) and is generally defined as the commercial application of new knowledge and the implementation of ideas. It has been acknowledged as a key driver of firm growth and productivity (Ganotakis, 2012; Slaper et al, 2011) and a driving force for industrialised economies’ international competition (Kuhlmann and Edler, 2003). This research undertakes an evaluation of employee-managers’ human capital to create a new concept, Innovative Human Capital (IHC) In turn it examines the concept’s effect on small firm innovation and assesses the resulting implications for public policy. Does IHC contribute to firm-level innovation? Second, does IHC have differing outcomes in small and larger-sized firms?

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Conclusion