Firm Performance as an Outcome of Human Capital: A Review of Literature
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Date
2023
Authors
Matsalia, Vincent Alwaka
Kinyua, Godfrey Muigai
Journal Title
Journal ISSN
Volume Title
Publisher
IJERN
Abstract
Human capital, which is grounded in human capital theory, resource-based view, and knowledge
management view, is the fulcrum in the acquisition of knowledge, skill, abilities, and other
characteristics. Accodingly, human capital has the potential of helping firms to be able to achieve
capabilities that translate to competitive advantage. These capabilities assist firms to remain
competitive; leading to sustained performance which is modeled using the balanced scorecard,
performance prism framework, Malcom Baldrige model and performance pyramid model. The
overall objective of the study was to review conceptual, theoretical as well as empirical literature on
the relationship between human capital and firm performance so that research gaps could be
identified to inform future studies. Reviewed literature on human capital conceptualises the
construct based on individual production, societal wellbeing and at the organisational level. At the
individual level, human capital determines job seeking behaviours while at the societal level human
capital aid the synthesis of both individual and organizational perspectives. The organizational view
argue that human capital has the capability of giving a firm competences and competitiveness in an
industry. Empirical studies reviewed show that human capital is positively related to firm
performance with performance curve depicting curvilinear trait regardless of the type of data used.
Reviewed literature brings out a contradiction in that firm specific human capital enhances
performance and at the same time increases costs in terms of incentive costs to employees.
Literature reviewed demonstrates that management of enterprises are unwilling to commit vast
specific human capital notwithstanding the assumption in order to butress competitive advantage.
Based on the gaps identified, the study proposes a theoretical framework on the relationship
between human capital and firm performance. The study further proposes the need for future
research to valiadate the conceptualized link using empirical data.
Description
Article
Keywords
Human Capital, Firm Performance, Competitive Advantage
Citation
Matsalia, V. A., & Kinyua, G. M. Firm Performance as an Outcome of Human Capital: A Review of Literature.