Keywords

human capital, human resource management, value appropriation, competitive advantage, market signaling

Abstract

Research Summary:

Prior scholarship has assumed that firm-specific and general human capital can be analyzed separately. This paper argues that, in some settings, this is not the case because prior firm-specific human capital investments can be a market signal of an individual’s willingness and ability to make such investments in the future. As such, the willingness and ability to make firm-specific investments is a type of general human capital that links firm-specific and general human capital in important ways. The paper develops theory about these investments, market signals, and value appropriation. Then the paper examines implications for human resource management and several important questions in the field of strategic management, including theories of the firm and microfoundations of competitive advantage.

Managerial Summary:

While managers don’t often use the terms firm-specific and general skills, they certainly recognize that investments employees make in their skill sets are more or less relevant to a specific firm. For instance, investing in specific relationships within a firm or learning a firm’s proprietary software would be considered firm-specific investments. While such skills may seem relevant only to the particular firm in which they were invested, these investments may also send valuable signals to competing firms that such employees are willing and able to make similar investments elsewhere. Hence, managers should be interested in determining if a potential hire has made prior firm-specific investments to help them know if that person might be likely to make such investments in their future place of employment.

Original Publication Citation

Morris, S. S., Alvarez, S. A., Barney, J. B., & Molloy, J. C. (2016). Firm‐specific human capital investments as a signal of general value: Revisiting assumptions about human capital and how it is managed. Strategic Management Journal.

Document Type

Peer-Reviewed Article

Publication Date

2016

Publisher

Wiley & Sons

Language

English

College

Marriott School of Management

Department

Management

University Standing at Time of Publication

Associate Professor

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