Human capital development dynamics: the knowledge based approach.

Author:Ndinguri, Erastus


Human capital development has been described as a key economic driver (Benhabib & Spiegel, 1994; Schultz, 1961). How a society develops may result from the accumulation or absorptive power of knowledge available to them. The economic muscle emanating from human capital is depicted in the endogenous growth model where Romer (1990) articulates a positive relationship between large pulls of human capital and faster economic growth. Human learning occurs continuously and is influenced by their surroundings and contact with others. Therefore, learning becomes a critical factor at an organizational and individual level (Malerba, 1992). How you strategically operationalize learning in the real world may determine your success in the use of the knowledge acquired. Investing and rebuilding, customizing or adjusting skills has a positive effect on human capital development (lepak & Snell, 1999). Technology has boosted learning and consequently human capital development in general. Organization Human capital development approaches (HCDA's) aim to improve value, team work, consciousness among individual employees and overall collective performance. Today, technology plays a big part in human capital development as the demand for new skills and relational requirements in organizations increases. (Waldeck & Leffakis, 2007). The 1950's through 1970's saw the dominance of the production industrial economy. During this period a labor based human capital was very important to the organizational processes. However, today with change in organizational demographics, globalization, and technological changes; emergence of the knowledge based worker has taken prominence as the new model in organizations (Chinowsky & Carrillo, 2007; Merriam, Caffarella & Baumgartner, 2007). Human beings are seen as a critical aspect of any organization, where they are seen as business agents and both tangible and intangible assets in organizations exist and are sustained by people (Sveiby, 2001). Knowledge, even though intangible, can be part of the strategic process in the organization (Spender, 1996). The significance of knowledge in the organization may have gained higher written prominence in recent times but its importance has been recognized throughout history. Weber (1968) articulated that where bureaucracy exists, it is organized on the basis of knowledge rather than the basis of power only. How then does a firm develop knowledge to allow strategic gains? HCDA such as training or mentoring are a few of the ways to improve both human knowledge and competence. Technology as a value added tool has enhanced the way in which HCDA's are conducted and transferred in organizations. Technology influenced approaches of human capital development are a vital piece in the knowledge based view literature while at the same time looking at the strategic utilization of the knowledge by the organization and the individual employees. As an emerging branch of the resource based view, knowledge based view enhances the theory of the firm by addressing areas such as nature of coordination, organization structure, role of management, and the allocation of decision making (Grant, 1996). Therefore, for knowledge to create value the paper considers simple aspects that intertwine with Grant's (1996) characteristics of knowledge utilization within the firm: Human Capital Development Approaches (HCDA), knowledge utilization and performance.


The HCDA-knowledge- performance connection

Human capital is a strategic factor in production (Son, 2010) as it represents the cognitive competencies, skills, relational behavior and knowledge of individuals that enhance productive output (Shuller, 2000) that eventually contributes to organization productive performance (Shuller, 2000; Son, 2010). Resources based view (RBV) articulation on the internal firm resources as a form of competitive advantage (Hoskisson, Hitt, Wan & Yiu, 1999) gave value to the strategic importance of people in an organization. RBV brought to light the added value of people in organization strategic management literature by defining and linking concepts such as knowledge (Argote & Ingram, 2000; Grant, 1996), dynamic capability (Eisenhardt & Martin, 2000; Teece, Pisano & Schuen, 1997; Barreto, 2010), organization learning (Fiol & Lyles, 1985; Fisher & White, 2000), and organizational leadership (Norburn & Birley, 1988) to strategic organizational performance. Changes in both external and internal environments may affect organizational performance (Chattopadhyay, Glick, & Huber, 2001) therefore; HCDA's are used to enhance knowledge and use it to strategically attain firm value (Petty & Guthrie, 2000). The ability to increase intellectual knowledge in the organization creates increased productivity (Petty & Guthrie, 2000). HCDA such as training has been linked to skill building and knowledge building which results to organization productivity (Goldstein & Gilliam, 1990). Research done by Black and Lynch (2001) on the manufacturing and non-manufacturing sectors on the link between knowledge improvement training and productivity revealed that for manufacturing the greater the proportion of time spent in formal employee training the higher the organizational productivity. For non-manufactures the content of training programs provided by employers seems to have an important impact on firm productivity. Organizations have shifted their outlooks about HCDA from a stand-alone event to an entirely integrated, strategic component of the firm (Salas & Cannon-Bowers, 2001). Strategically, even though a firm may have a great strategic plan in place, if the human capital is not developed to a point where they have access to the relevant knowledge, skills, and attitudes to successfully support or carry out the strategic plan, the plan is watered down (Sum, 2010) With the cost of human capital development today running into billions of dollars annually (Green, Patel, Lemke & Bussenger, 2010), investments made in human capital development approaches require justification in terms of improved organizational performance (Huselid, 1995; Shuller, 2000). As a result different human capital development approaches, including action learning (Freedman, 2011; Kuhn & Marsick, 2005), just-in time training (Beckett, Agashae & Oliver 2002), mentoring (Allen et al., 2004; Kram, 1985), coaching (Wales, 2002; Locke, 2008) and technology simulation (Read & Kleiner, 1996) have been a key in influencing the sphere of knowledge development. Firms operating in knowledge based environment are said to be more dependent on employee knowledge (Porter, 2000). Therefore, the approach used to develop human capital has a significant contributing linking factor to the outcome of knowledge retention therefore; the performance of the firm (Sum, 2010).

Many scholars have embarked on looking at the knowledge based view of the firm (Demsetz, 1988; Conner & Prahalad, 1996; Kogut & Zander, 1992; Grant, 1996; Madhok, 1996) in the hope of developing it into a theoretical status. Knowledge is among the valuable resource to the firm that is protected and ways are sorted by the management on how to organize it and efficiently generate knowledge and capability (Nickerson & Zenger, 2004). How and what knowledge is imparted and integrated into the firm influences the competitive edge that results from use (Eisenhardt & Martin, 2000; Grant, 1996). Knowledge based view as a strategic formulator is reinforced by its main components: the people who are the knowledge carriers and the agents of the business (Sveiby, 2001); organizational structures created by the people to allow interaction as well as self-expression (Weick, 1983; Sveiby, 2001); transfer capabilities of knowledge both internal and external (Sveiby, 2001); and knowledge management (Nickerson & Zenger, 2004; Bencsik & Solyom, 2011). The literature advances the idea that human capital development approaches is a basic entity of knowledge generation (Sum, 2010) which results to strategically using the acquired knowledge and hence evoking firm performance (Conner & Prahalad, 1996; Eisenhardt & Martin, 2000). This connected depiction triggers the model described in this paper based on Grants (1996) characteristics that are pertinent to utilization of knowledge within the firm to create value.


Grant's (1996) analogy on knowledge based theory of the firm is a realization of the different types of knowledge that are important to the firm. Grant established the characteristics that have consequences to management as they try to create knowledge value in the organization. In his description Grant (1996) pinpoints a number of characteristics that are pertinent to the utilization of knowledge within the firm to create this value: transferability, capacity for aggregation, appropriatability, specialization in knowledge acquisition, and the knowledge requirements of production. The given characteristics according to Grant (1996) articulate that firms exist as institutions for production of goods and services because they can create conditions under which multiple individuals can integrate their specialize knowledge. Grant (1996) looks at these characteristics in terms of whether knowledge is explicit versus tacit, its transmission and receipt, return on knowledge resource, capacity to acquire and the production of knowledge to value; in the current paper we consider the characteristics that...

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