TY - JOUR
T1 - Human capital investments and employee performance
T2 - An analysis of IT services industry
AU - Bapna, Ravi
AU - Langer, Nishtha
AU - Mehra, Amit
AU - Gopal, Ram
AU - Gupta, Alok
PY - 2013/3
Y1 - 2013/3
N2 - The rapid pace of technological innovation necessitates that information technology (IT) services firms continually invest in replenishing the skills of their key asset base, the human capital. We examine whether human capital investments directed toward employee training are effective in improving employee performance. Our rich employee level panel data set affords us the opportunity to link formal training with performance at the individual employee level. Using a dynamic panel model, we identify a significant positive impact of training on employee performance. A unit increase in training is linked to a 2.14% increase in an employee's performance. Interestingly, we find that in the IT sector, skills atrophy and consequently high-experience employees reap higher returns from training, which highlights the uniquely dynamic nature of IT knowledge and skills. We also find that general training that an employee can utilize outside the focal firm improves employee performance. However, specific training pertinent to the focal firm is not positively linked to performance. On the other hand, although domain and technical training both enhance employee performance individually, the interaction between the two suggests a substitutive relationship. Thus, our findings suggest that the value of training is conditional on a focused curricular approach that emphasizes a structured competency development program. Our findings have both theoretical and practical significance. Most important, they justify increased human capital investments to fuel future growth in this important component of the global economy.
AB - The rapid pace of technological innovation necessitates that information technology (IT) services firms continually invest in replenishing the skills of their key asset base, the human capital. We examine whether human capital investments directed toward employee training are effective in improving employee performance. Our rich employee level panel data set affords us the opportunity to link formal training with performance at the individual employee level. Using a dynamic panel model, we identify a significant positive impact of training on employee performance. A unit increase in training is linked to a 2.14% increase in an employee's performance. Interestingly, we find that in the IT sector, skills atrophy and consequently high-experience employees reap higher returns from training, which highlights the uniquely dynamic nature of IT knowledge and skills. We also find that general training that an employee can utilize outside the focal firm improves employee performance. However, specific training pertinent to the focal firm is not positively linked to performance. On the other hand, although domain and technical training both enhance employee performance individually, the interaction between the two suggests a substitutive relationship. Thus, our findings suggest that the value of training is conditional on a focused curricular approach that emphasizes a structured competency development program. Our findings have both theoretical and practical significance. Most important, they justify increased human capital investments to fuel future growth in this important component of the global economy.
KW - Dynamic panel model
KW - Employee performance
KW - Human capital theory
KW - IT services
KW - Indian IT industry
KW - Training and productivity
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U2 - 10.1287/mnsc.1120.1586
DO - 10.1287/mnsc.1120.1586
M3 - Article
AN - SCOPUS:84874742682
SN - 0025-1909
VL - 59
SP - 641
EP - 658
JO - Management Science
JF - Management Science
IS - 3
ER -