PEOPLE DRIVING PERFORMANCE: THE FINANCIAL IMPLICATIONS OF HUMAN CAPITAL FOCUS AS HIGHLIGHTED IN FIRM ANNUAL REPORTS

Open Access
Author:
Dlugos, James Steven
Area of Honors:
Interdisciplinary in Finance and Labor and Employment Relations
Degree:
Bachelor of Science
Document Type:
Thesis
Thesis Supervisors:
  • Stan Gully , Thesis Supervisor
  • Brian Davis, Honors Advisor
  • Stan Gully, Honors Advisor
  • Jean Phillips, Faculty Reader
Keywords:
  • Human Capital
  • SHRM
  • Upper Echelons
  • RBV
Abstract:
In an age of technological advancement and rapid innovation, markets have become increasingly competitive and firms now need to find new sources of unique competitive advantage that will allow them to retain and improve their market share. Although product innovation has historically been considered the primary factor in firm success, this study aims to investigate critical role of human capital as a source of sustainable competitive advantage that can be recognized by firms. Human capital theory has long suggested that firms should be able to benefit from strategically investing in the knowledge and skills of their employees. Empirical research has demonstrated the important role of strategic human resource management but less research has been done examining how the human capital focus of key decision makers can influence firm level outcomes. As such, this study examines the link of the human capital focus of firms as highlighted in their annual reports to the financial performance of 205 companies in the Major Pharmaceuticals Sector. Annual reports were coded for the relative frequency with which human capital terms were used and this frequency was related to annual gross firm income, controlling for firm size. The findings of this study have major implications for both the theoretical and applied fields of human capital. These implications include direct contributions to the methods that are currently being used to analyze firms, specific insights into the complex and cross-functional dynamics of firm performance, and the advancement of the theoretical literature in support of human capital theory. Ultimately, findings support the belief that firms can generate a specific, measureable competitive advantage through their investment in human capital across the firm.