Doctoral research

Human Capital Theory on organizational and economic success has received much attention over the years. This theory postulates human capital as productive wealth which is embodied in labor, skills, and knowledge whereby individuals acquire or have inborn skills which contribute to their economic productivity. In most cases, it has been linked with sustainable economic growth within an organization and society. Tarek Alnachef1 & Anas Ahsan (2014) researched to find out the effect of human capital on organizational performance. Their study found out that there is a relationship between human capital management and organizational economic outcome. According to them, investment in human capital education leads to capital effectiveness and efficacy leading to improved production. Human capital enhancement leads to organizational competitiveness based on Tarek & Anas (2014) insights. Organizational investment in human capital development unlocks employees’ potentials or builds their potentials leading to increased production.

Organizations are endowed with different resources such as assets, human resource, and capital among others. Human capital has been defined as an integral organizational resource which impacts on organizational productivity and competitive advantage. According to Robert E. Ployhart and Thomas P. Moliterno, 2011, human capital is an organizational resource created through the emergence of individuals’ knowledge, abilities, and skills among other personal attributes. Individuals are transformed into a unit line of production because they coordinated and organize other production resources for sustainable production. Human capital investment leads to quality labor force which is efficient and effective.

Competitive advantage is an aspect associated with an investment in human capital and it leads to positive economic growth. It is hypothesized that organizations with a heterogeneous labor force have improved aspects of innovation and creativity. According to Elena Pelinescu 2014, human capital influences the internal rate of innovation within organizations. Additionally, it impacts on the rate of diffusion of technology determining the level of production. Human capital determines the level of output within an organization whereby the accumulation of human capital and innovation influence labor productivity (Elena Pelinescu 2014). Investment in human capital determines organizational competitive advantage and the overall level of production. Employee empowerment in terms of knowledge and training helps individuals to develop their intellectual leading to innovative creations. Innovation is the backbone to organizational competitive advantage in the dynamic global environment. It determines the level of production among organizations and overall the profit margins

Human capital is associated with economic growth within countries. According to research by Elena Pelinescu 2014 it was found that there is a positive relationship between GDP per capita and human capital innovative capacity which is generated by investment in education. Counties that invest in education programs to develop their human capital have a positive GDP per capita compared to those countries that spend less on education programs (Elena Pelinescu 2014). The rate of increase in GDP per capita in research study population was by 6% per year suggesting that investing in human capital leads to positive impacts on a country’s economy. Besides, human capital investment leads to technological growth with a country at a rate of 1%. Though this was the majority conclusion, it was evidenced that some countries can spend on education programs but GDP per capita is negative as compared to the spending.

Human capital theory propagates that development of human capacities impacts on employee’s efficiency. It is hypothesized that maximizing on human resource leads to maximization of organization production and economic success. Based on research by T. Russel Crook et al, 2011 investment in human capital results in positive individual and organizational performance outcome. T. Russel Crook et al, 2011, found out that individual job performance is influenced by the level of human capital management. It was shown that 71% of organizations that were human capital intensive have a higher level of performance and competitive advantage. From the analysis of organizations that increased their human capital programs had increased output. Building on human capital influence performance whereby it involves aspects such as training managers, experiences, and education impact on organizational overall performance (T. Russel Crook et al, 2011). Human capital investment and employee performance are unevenly distributed.

Apart from organizational growth, human capital investment has been identified as a bridge to individual economic success. According to this model of postulation, individuals invest in human capital because they believe it leads to personal economic advantage. According to Jens M. Unger et al, 2011, individuals maximize their economic benefits by investing in their human capital. In their study, it was shown that individuals who have invested in their human capital have engaged in economic activities such as entrepreneurship more compared to individuals who have invested less in their human capital. Human investment towards successful personal gain as identified in the study involve investment in education, knowledge, start-up experiences, industry experience, and management experience among others.

Though human capital investment has been severally linked with economics it has received much criticism whereby these criticism models opine that it is not merely an economics theory but it influences the wider spectrum of human affairs. Human capital investment impacts on education and politics. HTC theory suggests that education increases an individual’s productivity and earnings hence education is an investment. According to Emrullan Tan, 2014, human capital theory is not bound to the economic sphere but it is a theory applicable to all human spheres. It influences education, politics, and an individual’s level of success. The idea that human capital theory is economics was only grounded on neoclassical thematic but society has undergone dynamic change hence its incorporation into other spheres.

References

Alnachef, T. H., & Alhajjar, A. A. (2017). Effect of human capital on organizational performance: A literature review. International Journal of Science and Research (IJSR), 6(8), 2319-7064.

Crook, T. R., Todd, S. Y., Combs, J. G., Woehr, D. J., & Ketchen Jr, D. J. (2011). Does human capital matter? A meta-analysis of the relationship between human capital and firm performance. Journal of applied psychology, 96(3), 443.

Pelinescu, E. (2015). The impact of human capital on economic growth. Procedia Economics and Finance, 22, 184-190.

Ployhart, R. E., & Moliterno, T. P. (2011). Emergence of the human capital resource: A multilevel model. Academy of management review, 36(1), 127-150.

Tan, E. (2014). Human capital theory: A holistic criticism. Review of Educational Research, 84(3), 411-445.

Unger, J. M., Rauch, A., Frese, M., & Rosenbusch, N. (2011). Human capital and entrepreneurial success: A meta-analytical review. Journal of business venturing, 26(3), 341-358.