Firm Productivity Moderated Link Between Human Capital and Compensation: The Significance of Task‐Specific Human Capital

Abstract

The human capital of a firm as manifested by employee knowledge and experience represents a key resource of a firm's capabilities. Prior empirical studies have found that firms composed of high levels of human capital experience superior firm performance. Human capital theory proposes that an individual's general or firm‐specific human capital is positively related to compensation. However, empirical studies examining firm‐specific human capital's association with higher employee compensation have been inconclusive. The current study proposes that firm‐specific human capital be categorized as task‐specific and non‐task‐specific. Employees accumulate task‐specific human capital through duties conducted in their current position. Non‐task‐specific human capital represents experiences gained in prior positions to an employee's current job within the firm. Utilizing human capital data from 38,390 employees representing 76 firms in the IT sector, this study examines the association between forms of human capital and employee compensation at different levels of firm productivity. Results show that task‐specific human capital is associated with higher employee compensation. In addition, firm productivity moderates this association.

Human Capital Factors Affecting Human Resource (HR) Managers' Commitment to HR and the Mediating Role of Perceived Organizational Value on HR

“…As an anonymous reviewer rightfully pointed out, the variables comprising HR‐specific human capital here are less malleable than HR‐specific knowledge, skills, and abilities, although these variables are widely used in measuring human capital (Crook et al, ). Thus, one implication is that organizations should select, place, and more importantly retain the right people in HR instead of rotating them across different occupations/job families as a way to enhance their commitment to HR (Schulz et al, ), the effectiveness of HR, and ultimately firm performance (Huselid, Jackson, & Schuler, ). However, although we could not directly measure and compare HR‐specific competencies (i.e., knowledge, skills, and abilities) across managers (firms), it would be also useful to help HR managers to enhance their HR‐specific competences (e.g., via certification).…”

“…As such, a high level of CHRO's HR‐specific human capital will clearly signal to HR managers (subordinates) that the organization values the roles of HR by placing a highly experienced, educated, and influential person in its top HR post. Second, CHROs with high HR‐specific human capital will not only exert high influence and voice in decision‐making processes in the organization, but also tend to receive higher compensation (Datta & Iskandar‐Datta, ; Schulz, Chowdhury, & Van de Voort, ). As such, from the standpoints of organizations, having CHROs with high levels of human capital will entail high levels of tangible (e.g., salary) and intangible costs (e.g., costs associated with strategic decision‐making).…”

Human Capital Management: Understanding Its Implications Over the Business

“…it applies to many organizations, and on the other hand, firm-specific human capital strengthens an employee's efficiency only to the immediate employer i.e. for a particular organization [15]. Formal education (primary, secondary and tertiary), professional courses (short and long-term), various certificate courses, vocational, experiences (personal and professional), etc.…”

Human or Social Resources Management: Which Conditions ForceHRDepartments to Select the Right Employees for Organizational Social Capital?

“…There are several studies (Mincer, ; Hitt et al ., ; Makela et al ., ; Tian et al ., ; Schulz et al ., ) emphasizing the benefits of human capital (Schultz, ) and searching the ways how HR practices should be used to improve this type of capital. Nowadays there is a growing trend among scholars to explain how level of organizational social capital can be increased.…”

“…We claim that, among all HRM practices, employee selection deserves special attention in terms of developing external and internal social capital (Adler and Kwon, ). If we take a closer look into the literature on employee selection, it is possible to see that searching ways to develop human capital is a dominant issue (Coff, ; Makela et al ., ; Winnie and Sels, ; Schulz, et al ., , Shaw et al ., ; Lakshman, ). Human capital represents employees' contributions to an organization in terms of levels of education, skills, work experiences and training (Wright and McMahan, ).…”