Firm‐specific human capital investments as a signal of general value: Revisiting assumptions about human capital and how it is managed
| DOI | http://doi.org/10.1002/smj.2521 |
| Published date | 01 April 2017 |
| Author | Shad S. Morris,Janice C. Molloy,Sharon A. Alvarez,Jay B. Barney |
| Date | 01 April 2017 |
Strategic Management Journal
Strat. Mgmt. J.,38: 912–919 (2017)
Published online EarlyView 2 May 2016 in WileyOnline Library (wileyonlinelibrary.com) DOI: 10.1002/smj.2521
Received 16 November 2012;Final revisionreceived 14 January 2016
FIRM-SPECIFIC HUMAN CAPITAL INVESTMENTS AS
A SIGNAL OF GENERAL VALUE: REVISITING
ASSUMPTIONS ABOUT HUMAN CAPITAL AND HOW
IT IS MANAGED
SHAD S. MORRIS,1*SHARON A. ALVAREZ,2JAY B. BARNEY,3and
JANICE C. MOLLOY4
1Marriott School of Management, Brigham Young University, Provo, Utah, U.S.A.
2Daniels College of Business, University of Denver, Denver, Colorado, U.S.A.
3David Eccles School of Business, University of Utah, Salt Lake City, Utah, U.S.A.
4College of Business, University of Michigan— Dearborn, Dearborn, Michigan,
U.S.A.
Research summary: Prior scholarship has assumed that rm-specic and general human capital
can be analyzed separately. This article argues that, in some settings, this is not the case because
prior rm-specic human capital investments can be a market signal of an individual’swillingness
and ability to make such investments in the future. As such, the willingness and ability to make
rm-specic investments is a type of general human capital that links rm-specic and general
human capital in important ways. The article develops theory about these investments, market
signals, and value appropriation. Then, the article examines implications for human resource
management and several important questions in the eld of strategic management, including
theories of the rm and microfoundations of competitive advantage.
Managerial summary: While managers don’t often use the terms rm-specic and general skills,
they certainly recognizethat investments employees make in their skill sets are more or less relevant
to a specic rm. Forinstance, investing in specic relationships within a rm or learning a rm’s
proprietary software would be considered rm-specic investments. While such skills may seem
relevant only to the particular rm in which they were invested, these investments may also send
valuable signals to competing rms 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 rm-specic investments to help them know whether that person might be likely to
make such investments in his or her future place of employment. Copyright © 2016 John Wiley
& Sons, Ltd.
INTRODUCTION
Can general and rm-specic human capital be
analyzed separately? Scholars have traditionally
viewed general and rm-specic human capital
as separate investments that inuence who is
Keywords: human capital; human resource management;
value appropriation; competitive advantage; market
signaling
*Correspondence to: Shad S. Morris, 574 TRNB, Brigham Young
University,Provo, Utah U.S.A. 84602-3113.
E-mail: morris@byu.edu
Copyright © 2016 John Wiley & Sons, Ltd.
more likely to appropriate the value created from
the human capital— the rm or the employee
(Chadwick, 2016; Hatch and Dyer, 2004; Lepak,
Takeuchi, and Swart, 2011; Molloy and Barney,
2015; Ployhart and Moliterno, 2011; Wang, He,
and Mahoney, 2009; Wright, Dunford, and Snell,
2001). However, these views may not be con-
sistent with reality. Increasing evidence points
to conditions under which rm-specic human
capital investments signal the existence of valuable,
but often difcult to observe, general human
capital: a person’s willingness and ability to make
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