The impact of training participation and training costs on firm productivity in Belgium

Abstract

Recent studies have shown that human resource management practices such as training, participation or incentive compensation significantly contribute to firm performance (see, e.g., Huselid 1995; Ichniowski, Shaw and Prennushi 1997; Black and Lynch 1998; Bartel 2000; Zwick 2006). Although the human capital of the firm is not explicitly shown on the balance sheet, the value of the firm is at least in part driven by the value of the people who run the show. In this era of knowledge and information, continuous education and training of workers and employees is no longer an option but a must for most firms. This paper looks at the possible relation between employer provided training and firm performance for a sample of over 10,000 large Belgian firms. We first estimate a standard Cobb–Douglas production function to assess the firms' expected performance based on the input of capital and labour. Our results show that the extent to which a firm performs either better or worse than expected, can partly be explained by the relative number of workers or employees that participate in employer provided formal training or education programmes. In addition, training costs seem to have an impact as well. However, the amount that is spent per person only matters for non-manufacturing firms. This implies that targets set by international or local governments should focus first on training participation rather than on training costs. With this finding, we contribute to this field of research in two ways. First, our data are taken from the published financial statements. This allows us to work with auditor certified information that is available for all firms. Second, we include training costs in the analysis.