Firm-specific Human Capital at the Crossroads: A Conversation on Current Issues and Future Directions<sup>*</sup>

Coff, Russell; El-Zayaty, Andy; Ganco, Martin; Mawdsley, John

doi:10.1108/s0742-332220200000041003

Cited by 7 publications

(6 citation statements)

References 61 publications

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“…Most entrepreneurs returning to wage work join a different employer than the one they had before they became entrepreneurs, while most employees in the control group do not change employers. If human capital contains a significant firm‐specific component (e.g., Coff, El‐Zayaty, Ganco, & John, 2020), our main results may be picking up the effect of job switching in general rather than the impact of entrepreneurial experience.…”

Section: Estimationmentioning

confidence: 86%

The long‐term consequences of entrepreneurship: Earnings trajectories of former entrepreneurs

Mahieu

Melillo

Thompson

2021

Strategic Management Journal

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Research Summary Previous literature has documented a large short‐term earnings gap for entrepreneurs that return to the wage sector. Using matched employer–employee data from the Belgian Labor Market & Social Protection Database, we document how this initial gap is remarkably persistent. Former entrepreneurs earn 27% less than propensity‐scored matched controls 5 years after returning to wage work, which is almost unchanged from the short‐term earnings drop. About 60% of this gap results from reductions in hours worked while the remaining 40% is due to reductions in the wage rate. We offer evidence that the decline in hours worked is a choice of former entrepreneurs and therefore reflects a compensating differential, while the decline in the wage rate is a penalty resulting from statistical discrimination by employers. Managerial Summary While previous work recognizes that entrepreneurs experience reduced earnings when they return to the wage sector, little evidence exists about the long‐term consequences of a spell of entrepreneurship. Using detailed administrative data from a large sample of Belgian entrepreneurs and wage employees, we document an earnings gap of about 27% compared with observationally equivalent employees 5 years after returning to wage work. About 60% of this earnings gap results from a reduction in hours worked, and this part appears to be the result of individual choices. The remaining 40% of the earnings gap is due to a decline in the wage rate, and this part appears to be imposed on returning entrepreneurs by employers.

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Section: Estimationmentioning

confidence: 86%

The long‐term consequences of entrepreneurship: Earnings trajectories of former entrepreneurs

Mahieu

Melillo

Thompson

2021

Strategic Management Journal

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“…In the case of FSHC, it is not clear why a firm-specific investment, which should on average decrease mobility, would have an advantage over a general HC investment, which would not, on average, decrease mobility. Coff et al (2020) and Campbell et al (2012) similarly address frictions in labor markets, both supply and demand side, highlighted as "allow [ing] for situations in which FSHC could be valued by firms other than the focal firm, and thus results in more rather than less mobility" (Coff et al, 2020).…”

Section: Notesmentioning

confidence: 99%

“…Coff and Kryscynski (2011: 1432) agree that “an excessive focus on firm-level HR practices has obscured the inherently multilevel nature of HC (Ployhart & Moliterno, 2011). ” Likewise, it is “more than an individual-level construct” (Coff, El-Zayaty, Ganco, & Mawdsley, 2020: 58) due to “the socially constructed nature” (Ployhart, 2015).…”

Section: Best Practices In Hr: Evidence Of (Unexpectedly?) Large Effectsmentioning

confidence: 99%

“…Complementarity is uniquely important because it can result in both value creation and value capture (Chadwick, 2017). To satisfy the “creating high value” part, it seems likely, as noted, that FSHC must be, as Coff et al (2020: 58; see also Chadwick, 2017) put it, “more than an individual-level construct” and rather “a co-developed resource between employees, firm resources, and other stakeholder, and accrues with time and experience in a focal firm” and probably also “insights from customer interactions and relationships” (e.g., Greer, Lusch, & Hitt, 2017). This seems logical and others agree.…”

Section: Best Practices In Hr: Evidence Of (Unexpectedly?) Large Effectsmentioning

confidence: 99%

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The Resource-Based View of the Firm, Human Resources, and Human Capital: Progress and Prospects

Gerhart

Feng

2021

Journal of Management

133

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We describe the interplay between the resource-based view (RBV) and strategic human resources (HR)/human capital (HC) literatures in select areas of particular interest. In each area, we aim to highlight key issues, review relevant evidence where available, and identify future research needs. We begin by reviewing research on HR-related firm heterogeneity. We then discuss best practices in HR, including evidence of the large apparent value they create. We also consider different views on the value and ease of imitation of best practices, including implementation challenges. Next, we briefly address the key roles of microfoundations and complementarity in helping understand the potential for value creation and value capture through the use of best practices. We then ask whether the use of best practices in the pursuit of competitive parity might warrant greater attention as this may be where the largest potential gains can be made. Finally, we consider a number of developments in the strategic HC literature, especially those related to firm-specific human capital (FSHC). We raise questions with views on issues such as the consequences of FSHC for workers; the definition and measurement of FSHC; whether worker immobility, a key to value capture, is good from a social return (or even a firm) return perspective; and the relative emphasis on value capture and value creation.

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“…1 To begin, internal labor markets research suggests that same-establishment workers will more often move into higher-skill positions through job ladders that confer understanding of the products, procedures, and proprietary systems used in the establishment specifically and by the employer more broadly (Becker 1962; Mincer 1962). On a related point, Lazear (2009) argued that workers tend to develop skills that are aligned with the needs of their employer over time (for a review of firm-specific human capital arguments, see Coff, El-Zayaty, Ganco, and Mawdsley 2020). Job progression systems that favor an internal workforce may thus lead same-establishment workers to be placed into jobs with greater requirements (Stewman 1986; Osterman and Burton 2006; DeVaro et al 2019; DeVaro 2020) and thus higher base starting salaries.…”

Section: Theories and Hypothesesmentioning

confidence: 99%

Inside Jobs: Salary Setting for Immigrants Crossing Establishment, Organizational, and National Boundaries

Rissing¹,

Lee

2021

ILR Review

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Using novel US Department of Labor administrative records, the authors test theoretical mechanisms to account for variation in immigrant workers’ starting salaries following key career transitions. Specifically, they examine differences in the base starting salaries and discretionary starting salary increases above these base starting salaries for 1) same-establishment hires, relative to 2) US-based establishment transfers, 3) international establishment transfers, 4) US-based external hires, and 5) international external hires. In support of the “insider premium” account, findings show that same-establishment hires tend to work in jobs with greater requirements, and thus higher base starting salaries. In partial support of the “outsider premium” account, findings show that US-based external hires receive larger starting salary increases than do same-establishment hires, conditional on the jobs they enter. This said, international external hires receive smaller starting salary increases than do same-establishment hires. Findings reveal distinct mechanisms, acting separately or in tandem, during salary-setting processes.

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Firm-specific Human Capital at the Crossroads: A Conversation on Current Issues and Future Directions^*

Cited by 7 publications

References 61 publications

The long‐term consequences of entrepreneurship: Earnings trajectories of former entrepreneurs

The long‐term consequences of entrepreneurship: Earnings trajectories of former entrepreneurs

The Resource-Based View of the Firm, Human Resources, and Human Capital: Progress and Prospects

Inside Jobs: Salary Setting for Immigrants Crossing Establishment, Organizational, and National Boundaries

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Firm-specific Human Capital at the Crossroads: A Conversation on Current Issues and Future Directions*

Cited by 7 publications

References 61 publications

The long‐term consequences of entrepreneurship: Earnings trajectories of former entrepreneurs

The long‐term consequences of entrepreneurship: Earnings trajectories of former entrepreneurs

The Resource-Based View of the Firm, Human Resources, and Human Capital: Progress and Prospects

Inside Jobs: Salary Setting for Immigrants Crossing Establishment, Organizational, and National Boundaries

Contact Info

Product

Resources

About

Firm-specific Human Capital at the Crossroads: A Conversation on Current Issues and Future Directions^*