Human capital and firm performance: A systematic review of the literature

Abstract

Human capital refers to the stock of knowledge, habits, social and personality traits, skills and competencies enabling the individual to perform labor so as to produce economic value. Its definition alone explains why it has been increasingly viewed as a crucial factor affecting the productivity of individuals and subsequently the productivity of firms. However, improvements in human capital may have a different impact on firms depending on the type of the organization. The objective of this dissertation is to identify the theoretical links between human capital and firm performance and document possible differences in empirical results between studies focusing on public listed and private non-listed companies. To do so, a systematic and comparative literature review of the studies focusing the effects of human capital on firm performance is conducted. In particular,98 research works were examined, out of which 41 dealt with the effects of intellectual capital on the performance of public listed firms through mostly quantitative, empirical analysis, while the remaining 57 investigated the impact of human capital on the performance of non-listed or uncategorized companies through systematic/literature reviews and empirical studies. 51.3% of the studies on non-listed firms and 34.1% of the studies on listed firms were focused on a particular industry or sector. In total, out of 98 studies, 9 (9.2%) were published in the 20th century, 26 (26.5%) were published during the first decade of the 21st century and the remaining 63 (64.3%) were published during the second decade of the 21st century. These findings indicate an increasing interest of researchers in the contribution of human capital to the survival and prosperity of contemporary corporate entities, as well as the emerging academic and business need to narrow down research on the relationship between human capital and firm performance and specialize on more specific fields and sectors. Research demographics showed that among the 98 studies, the country that appeared more frequently was Nigeria, followed by Kenya and China, Thailand, Pakistan, Malaysia, Hong Kong, Sri Lanka and Jordan, which may suggest that researchers are more interested in developing countries rather than in developed countries. Finally, practically all the empirical studies, systematic/literature reviews and theoretical analyses examined in the context of this dissertation acknowledged that human capital and its components have indeed a significant impact on one or more dimensions of firm performance, even if some of the studies could not successfully verify all their hypotheses. This outcome did not vary significantly between the cases of public listed companies and all other cases. On the contrary, differences were identified in the level of specialization and specific presentation of reviewed indicators, since the availability of public information in the first case allowed more extensive investigation, taking advantage of the existence of more financial and non-financial variables to test the hypotheses.