The impact of human capital and human capital investments on company performance: evidence from literature and European survey results

This study consists of a literature review and an analysis of an existing database on human resource management (HRM) (the Cranet survey). It focuses on research that connects human capital with the firm and asks whether education, skills/competence and training have any impact on company performance. The main results may be summarised as follows. It appears that training provided by firms for employees is not characterised by being general or specific but by what is needed to stay ahead of competitors. There is a growing body of literature suggesting that firms are financing both types of training. More recent research also suggests that investments in training generate substantial gains for firms even if employees can use this training in other firms. The evidence that employers profit from training investments comes from different countries including Britain, France, Ireland, the Netherlands, Sweden, and the US. Most of these studies indicate that training affects performance and not the other way around. The effects of education and skills/competence on aspects such as productivity and innovations are generally found to be positive and significant, though the connection with profitability might be less expected. Firms can also extract profit from prior education as they do from general training investments. Supporting employee development through training policies and methods for analysing training needs is important to explain the provision of training and training outcomes. Similarly, innovative (and comprehensive) HRM practices tend to be associated with positive company performance. Innovation and information technology (IT) both result in greater investment in training and also depend on education and skills in generating profits. Other findings suggest that training and comprehensive HRM practices are closely related to firms' innovative capacity. The lack of studies connecting small and medium enterprises (SMEs), labour market conditions (systems), and social partners with company training policies and performance measures such as productivity or profitability, makes it difficult to draw conclusions on these aspects. This suggests an incentive to research such matters more thoroughly in the future.

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The three volumes of the background report are indexed from TD/TNC 84.261 to TD/TNC 84.263; individual papers from these volumes are indexed from TD/TNC 84.264 to TD/TNC 84.283. The synthesis report from this third series is indexed at TD/IRD 88.32; its executive summary is indexed at TD/TNC 84.259. Show less