The Creation and Performance Implications of Firm-Level Human Capital Resources

Abstract

We investigate how the degree of alignment between individual and firm-level human capital resources influences performance. We argue that a high degree of alignment between firm and individual-level human capital profiles increases human capital utilization, coordination, and human capital transfer. This consequently improves performance, and the benefits increase with firm size. For nascent firms, this alignment is created through similarity of individual-level human capital profiles. Drawing on Utah residential real estate data from 1996-2014 and using novel measures to dynamically capture individual- and firm-level human capital profiles, we find that brokerages with higher brokerage-agent human capital alignment represent more home sellers and buyers than brokerages with lower alignment. These benefits increase with firm size. We also find that agent-agent human capital similarity in the first year significantly influences brokerage-agent human capital alignment (and consequently performance) in subsequent years. These results suggest that managers from founding onward must carefully craft and manage firm-level human capital resources to ensure high levels of alignment and utilization. Firms that better manage their general human capital may enjoy persistent performance advantages that are resistant to turnover and difficult for competitors to replicate.