Theoretical framework to analyze human capital – Performance relationship

This study reviews the literature on human capital firm performance with special focus to the influence of human capital (HC) on various dimensions of a firm. Combining the arguments from human capital theory and resource based theory; study proposes a framework to test the HC-performance relationship. The prominent point of this framework is to focus on the linkage of human capital dimensions with various firm performance cords. After scanning the literature, we focused on five performance cords namely productivity, technological progress, export, innovation and survival. The proposed framework highlights two aspects for further research. Firstly, it provides a concept to develop human capital measure that can account for its various dimensions. Secondly, it provides trajectory to link various HC dimensions to the selected firm performance dimensions. By developing such index and incorporating in the framework to further test its suitability, we can clear some of the main issues, like, whether all the dimensions of HC are equally important for firm performance or their relative importance differ. Also, which of the performance dimension is important for a specific firm performance dimension? Since the framework has been deduced from theories and evidences from various countries, it is testable in any economy.