Leveraging the innovative performance of human capital through HRM and social capital in Spanish firms

Abstract

Literature on Intellectual Capital provides interesting arguments about the key role of social and human capital, not only separately but also jointly, for innovation activities. Thus, given the acknowledged importance of these variables, this article studies (1) the direct relationship between social and human capital and innovative performance, (2) the links between these two components of intellectual capital, as well as the possible mediating role of human capital, (3) the effect of particular human resource management (HRM) practices (selection procedures, development programmes, empowerment and use of incentives on compensation) on social and human capital, and (4) the influence of innovative performance on firm performance. In our study, we define a population of firms in the most innovative Spanish sectors for an empirical test of this model, focusing on their R&D departments. Using data taken from 85 firms and applying Structural Equation Models, we have tested the hypotheses and obtained interesting results. It is the uniqueness of human capital, and not its value, which has a direct and positive effect on firm innovativeness. Such uniqueness, in turn, is enhanced through social capital and HRM practices such as empowerment and employee selection based on learning potential and interpersonal abilities. Social capital does not have, per se, a direct influence on innovation, but it indirectly does through human capital. Social capital, in turn, can be enhanced by the selection of individuals with learning potential and interpersonal skills, as well as by their involvement in decision-making processes. Finally, innovation improves firm performance.