Human Capital, Inter-firm Mobility and Organizational Evolution

Human Capital, Inter-firm Mobility and Organizational Evolution

Johannes M. Pennings and Filippo Carlo Wezel

The authors of this fascinating and original work contend that by analysing the conduct of organization members, a great deal can be learnt about firm behaviour and about the cooperative and competitive forces that underlie industry evolution.

Chapter 4: Human Capital, Social Capital and Firm Dissolution

Johannes M. Pennings and Filippo Carlo Wezel

Subjects: business and management, human resource management, organisation studies


4. Human capital, social capital and firm dissolution INTRODUCTION Many authors, expressing the view that the modern world is becoming a ‘knowledge society’, have discussed the importance of organization-level human and social capital for organizational performance and survival (for example, Kogut and Zander, 1996; Pfeffer, 1994; Uzzi, 1996). However, only a few studies have examined this relationship empirically, looking at the effect of founders’ human and social capital on organizational performance, and particularly, organizational survival (for example, Bates, 1990; Brüderl et al., 1992; Uzzi, 1996). Similarly, studies of the role of CEO characteristics have revealed that CEOs’ human capital features have an impact on organizational behavior and performance (for example, Boone et al., 1996). As was expected, in those studies higher founder or CEO human capital was shown to enhance organizational performance. But although founders’ and CEOs’ human and social capital are important to organizational success, other organization members’ human and social capital also play a critical role in organizational performance. This chapter attempts to deepen understanding of the determinants of organizational dissolution by introducing firm-level human and social capital in a hazard rate model of firm dissolution. We argue that organizational human and social capital decrease the likelihood of firm dissolution and that the specificity and non-appropriability of those forms of capital affect their contribution to firm dissolution. Of course, the message that people matter is hardly new (for example, Pfeffer, 1994). However, systematic theorizing and testing at the organizational level is rare,...

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