The effect of human capital on occupational health and safety investment: An empirical analysis of Spanish firms

• Date: 01 April 2019
• Published date: 01 April 2019
• DOI: http://doi.org/10.1111/1748-8583.12208
• Author: Maite Prieto,Imanol Nuñez

ORIGINAL ARTICLE

The effect of human capital on occupational health

and safety investment: An empirical analysis of

Spanish firms

Imanol Nuñez

1

|Maite Prieto

1,2

1

Business Administration Department,

INARBE—Universidad Pública de Navarra,

Pamplona, Spain

2

Technical Department, Vivienda y Suelo de

Euskadi, S.A., Vitoria, Spain

Correspondence

Imanol Nuñez, Business Administration

Department, INARBE—Universidad Pública de

Navarra, Campus de Arrosadia, s/n, 31006

Pamplona, Spain.

Email: imanol.nunez@unavarra.es

Funding information

Spanish Ministerio de Educación, Ciencia y

Cultura, Grant/Award Number: ECO2017‐

86054‐C3‐2‐R

Abstract

This paper analyses how firms' human capital influences their

investments in occupational health and safety (OHS). We

argue that the incentive to protect workers by investing in

OHS is a function of the stock of human capital. The empirical

analysis was based on data from the official Working Condi-

tions Spanish Survey on OHS management. Our sample was

restricted to 1,472 firms from the manufacturing and con-

struction industries. Our results show that firms that place

more emphasis on training and have a multiskilled and inno-

vative workforce invest more in OHS. However, having tech-

nological and design skills has no impact on the investment in

OHS, presumably because these skills are widely available in

the labour market. Finally, the analysis suggests that some

abilities such as problem solving may be affected by informa-

tional asymmetries and therefore firms may suboptimally

invest in protecting these capabilities.

KEYWORDS

competitive advantage, human capital, management, occupational

health and safety

1|INTRODUCTION

The relationship between skills, effort, and workers' health has attracted the attention of the most prestigious econ-

omists from the very beginning of the discipline. Adam Smith (1776), for example, in the Wealth of Nations stressed

that “mutual emulation and the desire of greater gain frequently prompted them (workers) to overwork themselves,

and to hurt their health by excessive labour.”To control the effect of work effort on health, the International Labour

Organisation (ILO) and the World Health Organization jointly established that the first and foremost objective of the

occupational health and safety (OHS) policies should be the “maintenance and promotion of workers' health and

Received: 28 July 2017 Revised: 5 June 2018 Accepted: 13 July 2018

DOI: 10.1111/1748-8583.12208

Hum Resour Manag J. 2019;29:131–146. © 2018 John Wiley & Sons Ltdwileyonlinelibrary.com/journal/hrmj 131

working capacity”(ILO, 2013). As firms and governments are responsible for OHS activities, they are obliged to pro-

tect workers and their human capital.

According to the Chicago School, human capital is the stock of knowledge and some social and personal attri-

butes (Becker, 1962). This stock determines workers' ability to work and is expected to generate economic value

for the organisation. It follows that the value of a firm's human capital depends not only on the “stock”variables

belonging to each worker but also on workers' actual capacity to generate economic value, which is determined

by, among other factors, the health status of each worker. The professional sports industry illustrates this: Expensive

star players only contribute to a team's performance if their health is good enough to play. If they are injured or out

of shape, their team's investment in human capital will not obtain the expected yield. This means that protecting and

maintaining workers' (players') health is a human resource (HR) priority for professional sports teams; their compet-

itive edge is strongly dependent on player health.

Despite the (allegedly) obvious, the important relationship between human capital and OHS, the link between

investment in OHS, and the value of a firm's human capital has not been thoroughlyanalysed. Colbert (2004) claims that

OHS activities have been systematically neglected in analysis of HR functions, which seriously hinders the development

and implementation of effective OHS policies. Only some studies have analysed the relationship indirectly and esti-

mated the effect of OHS activities on workers' productivity (Loeppke et al., 2009) or firms' performance (Fernandez‐

Muñiz, Montes‐Peon, & Vazquez‐Ordas, 2009). Others have analysed the relationship between organisations' work

practices and occupational injuries directly (although without considering investment in OHS), including studies of high

performance work systems (Barling, Kelloway, & Roderick, 2003), quality management practices, and technological

and organisational innovations (Harrisson & Legendre, 2003).

For the HRM field, the joint analysis of OHS investment and human capital has the potential to generate

improved HR policies. MacIntosh, MacLean, and Burns (2007), for example, stressed that the success in the imple-

mentation of some HR practices may be determined by workers' health status. Warr and Yearta (1995) analysed

how the interaction between motivation and health affected absenteeism in workers. More recently, Van de Voorde

and Beijer (2015) studied how high‐performance work systems influenced employee's outcomes, including health.

They observed that HR practices may improve work performance if they are associated with improvements in

health‐related variables. Ruiz and Corduras (2015) also investigated how certain HR practices contribute to the

humanisation of the production process (one consequence of which is health improvements) and how these HR prac-

tices improve some performance indicators such as corporate entrepreneurship and productivity.

In this paper, we argue that the relationship described in the sport industry, between an organisation's human cap-

ital and the investment in OHS, may also be in force in other sectorsand firms. Hence, firms with a strong human capital

should be more interested in investing in OHS to “maintain and promote workers' health and working capacity”as

defined by ILO/World Health Organization. We focused our analysis on a sample of 1,474 Spanish manufacturing

and construction firms and where occupational risk is quite high in both industries. OHS activities and human capital

were measured by responses to the VI Encuesta Nacional de Gestión de la Seguridad survey sponsored by the national

body responsible for OHS in Spain, the Instituto Nacional de Seguridad e Higiene en el Trabajo.

1

2|THEORETICAL CONCEPTUALISATION: HUMAN CAPITAL INVESTMENT

IN OHS

The human capital of a firm can be analysed, fundamentally, at twolevels: individual and organisational. At an individual

level, human capital theory was the brainchild of Becker (1962), who recognised health and fitness as componentsof

human capital. This perspective suggests that firms' investments in OHS may increase their stock of human capital, as

does, for example, investment in workers' training. Individual health thus becomes an intangible asset of the firm.

At the organisational level, which is the focus of our analysis, human capital is the sum of the skills and capabil-

ities that a firm employs in the production process (Wright, Coff, & Moliterno, 2014). Ployhart and Moliterno (2011)

132 NUÑEZ AND PRIETO