Industrial policy, social capital, human capital, and firm-level competitive advantage

Abstract

Despite the popularity of governmental action devised to foster firm performance, the link between industrial policy and firm-specific human capital and social capital has received scant attention in the strategic management literature. In this paper, we build a dynamic optimization model which bridges concepts from industrial policy, social capital, human capital, and firm-level competitive advantage. We derive theoretical and policy implications from our competitiveness model, concluding that it increases in the opportunity cost of social capital reduce the production of human capital, so the optimal opportunity cost of social capital under feasible industrial policy should be set equal to zero. A government's optimal industrial policy to help accumulate and churn human capital should reduce the opportunity cost of social capital to zero and reduce the probability of human capital leaving the community to zero. Thus, the model not only expands the potential determinants of competitive advantage in the context of governmental intervention, but also broadens the human capital theory and social capital theory in the creation of firm-specific human capital.

Start‐ups and entrepreneurial teams

“…Entrepreneurs acquire valuable knowledge, information, and resources from their external social network, which are difficult to obtain or imitate by other start‐ups, especially competitors, because of their scarcity (Barney, 1991). Therefore, a team's external social capital is a source of competitive advantages for new ventures (Hsu & Chen, 2019; Ruiz‐Ortega et al, 2013). Previous studies have shown that teams with higher external social capital are more likely to stand out from their competition, and even become the “bellwether” in their industry.…”

Structural network embeddedness and firm incremental innovation capability: the moderating role of technology cluster

“…Furthermore, in frequent and intense interaction with other members in an innovation network incrementally promotes and, in turn, enhances relational trust and reciprocity. Hsu and Chen (2019) argued that trust and reciprocity motivate network members to invest their energy and efforts in the tacit knowledge exchange process as well as to reveal knowledge.…”

Strategic Innovation and Competitive Advantage of Manufacturing SMEs: The Mediating Role of Human Capital

“…Several studies have obtained specific results from examining how human capital contributes to competitive advantage (Delery and Roumpi, 2017;Hsu and Chen, 2019) and have found a significant relationship between the two variables (Yaseen, Dajani and Hasan, 2016). AlQershi, Abas and Mokhtar (2019b), conclude from a literature review that the studies published to date suggest that firms which invest in human capital are on average more profitable than firms not characterized by human capital.…”