Role of Human Capital and Digitalization to Upgrade Innovation

Abstract

Innovation is the mainstay of the business landscape of business. It not only improves the firms’ position in the market but also provides a sustainable competitive advantage. Such a competitive advantage is inimitable for rivals, as it resides in the human capital and structures of firms. With the help of human capital, firms can realize innovation in products as well as processes. Firms with developed human capital can encourage their employees to undertake entrepreneurial ventures that are more often called intrapreneurship. Intrapreneurship is the way of carrying out innovative and creative activities by the employees of firms that are fully supported by them. Therefore, this research investigates the influence of human capital on the intrapreneurial activities of firms as they are closely associated with each other. In doing so, the mediating role of digitalization and supply-chain competitiveness is also studied. After collecting data from 195 Malaysian manufacturing sector firms, PLS-SEM was applied to test the modeled relationships. The findings reveal that human capital positively improves the intrapreneurial activities of firms. In addition, this relationship is fully mediated by digitalization as well as supply-chain competitiveness. This study provides a novel contribution by exploring the association of human capital and intrapreneurship with digitalization and value chain competitiveness. Therefore, firms should develop their human capital in order to remain innovative and competitive. Furthermore, developed human capital will complement the digitalization and competitive value chain in this association. Future researchers are suggested to study this relationship sector-wise, such as investigation of service sector and textile sector firms.