A STUDY OF HUMAN CAPITAL CREATION PRACTICES IN SOME INDIAN MANUFACTURING INDUSTRIES

Abstract

Human capital is considered as intangible asset as long as it contributes for achieving and sustaining firm's competitive advantage. Literatures supportably prove the contribution of human capital on organizational intellectual capital in view of achieving advantage and simultaneously describe human capital as employee's knowledge, skills, capabilities, commitment, know-how, and ideas and health (Skandia, 1998; Snell and Bohlander, 2007; Ulrich et al, 1999; Sullivan, 1999; Becker, 1962). Making the contribution as effective as possible, firms follow human capital theory, which recommends comparing the investment on employees' development with organizational future benefits such as improvement in production methods, processes, and controls (Becker, 1975). However, human capital is naturally movable with employees, and so they have a controlling mechanism on investing in human capital. Due to maximizing organizational benefits for achieving competitive advantage, organizations gradually shift their views on employees from human resources to human capital and constantly strive to implement strategies related to human capital creation or development practices. Therefore, it is obvious that human capital creation at each individual employee symbolizes his/her potential to contribute to organizational financial performance and productivity. Following the notion that not all kinds of human capital contributes to advanatge, this study analyzes how knowledge based employees, who have high value and unique human capital, perceive their human capital creation through organizational investment. So employees' gender and human capital variables (age, education, rank, and tenure) are needed to be kept constant. The specific focus of this study is to explore and examine the antecedents of employee perceived human capital creation from organizational human resource management (HRM) factors, knowledge management (KM) system success factors, and leadership factors in the context of Indian manufacturing industries. In this direction, the related measures for HRM, KM system, leadership and perceived human capital creation are identified and modified to suit with Indian manufacturing employees. This study also compares the above factors between private and public firm employees and analyzes the factor structure of each measure. Furthermore, this study attempts to identify the role of HRM factors and KM system factors in the relationship between transformational leadership and perceived human capital creation. To achieve the above objectives, this study has collected data from 470 Indian manufacturing employees, who have high value and unique human capital and interim leadership experience, with the use of both random and non random samplings. The conducted statistical analyses such as hierarchical regression analysis, correlation analysis, paired t-test, exploratory factor analysis, and confirmatory factor analysis reveal several important findings from this study. The results show that organizational culture, communication, tactical KM, interim leadership, transformational leadership, recruitment strategy, training, performance appraisal, reward strategy, and career management are the antecedents of employee perceived human capital creation. The significant differences between private and public firm employees are found in relation to the antecedents and perceived human capital creation. The exploratory factor analysis identified that HRM measures comprise of reward strategy, career-oriented training, performance appraisal, recruitment strategy, career management, and performance-oriented training factors; KM system measures comprise of factors namely problem solving approach, communicationoriented culture, tactical KM, and innovation-supportive culture; leadership measures include transformational leadership and interim leadership factors; and perceived human capital creation is an unidimensional construct. Further, this study moderately identifies the associations between these factors and employee's human capital and gender variables. Interestingly, this study finds that KM system factors play a mediator role, and HRM factors play mediator and moderator roles in the relationship between transformational leadership and perceived human capital creation. In testing the three theoretical frameworks or models namely the antecedents of perceived human capital creation model, model of transformational leadership and perceived human capital creation in which KM system factors play a mediator role, and the model of transformational leadership and perceived human capital creation in whichHRMfactors play a mediator role, confirmatory factor analyses provedthe fit of these models with data and suggested that these models are highly preferable than alternative models.