Skill Enhancing HR Investments, Contextual Endowments, and Innovation: A Four Country, Two-Wave Study

Abstract

We theorize and test the combined effects of both firm level skill- enhancing human resource investments, designed to boost specific and general knowledge resources, and of national level human capital contextual endowments, on incremental and radical innovation rates in knowledge intensive firms. Drawing on the intellectual utility of both the resource based view and the configurational perspective, at the firm level we theorize the impact of three such skill-enhancing human resource investments, namely specific training, general training and the implementation of functional flexibility, along with various configurations of these investments, on both incremental and radical innovation. At country level, we mobilize contingency arguments to hypothesize the likely effects of contextual variations in national level human capital provisions on the firm level knowledge resources-innovation relationship. Then, using a unique two-wave dyadic data set assembled from 1,764 interviews conducted in 882 knowledge intensive firms in France, Finland, Sweden, and the UK we test our arguments. Our analysis finds broad support for both direct relationships and synergistic interactions between particular combinations of the firm level skill-enhancing human resource investments examined and the incremental and radical innovation gains secured. Our results also demonstrate that higher levels of national human capital provision moderate the firm-level relationship between the skill-enhancing human resource investments and the innovation outcomes. Our analysis adds to the body of knowledge on the explanatory power of the resource-based view as a lens for explicating the link between skill-enhancing human resource investments and both incremental and radical innovation. From a contingency perspective, it also suggests that the value of firm level investments in specific and general knowledge resources for incremental and radical innovation is enhanced where national human capital contextual endowments are higher. We discuss the theoretical and practice implications of our findings and we outline possible directions for future research.