Perceived firm-specific human capital: mobility constraint or enhancer?
The research challenges the traditional view that firm-specific human capital (FSHC) restricts employee mobility, showing that perceived FSHC can actually enhance mobility.
The challenge
Driven by a firm’s unique routines and capabilities, firm-specific human capital (FSHC) is traditionally viewed as a means to deter employee mobility and sustain competitive advantage. This perspective is grounded in human capital theory, which assumes that the labour market can accurately value an individual’s skills and price them appropriately. However, this theory is being challenged by new viewpoints that suggest FSHC may not necessarily constrain mobility.
The research challenges the traditional view that firm-specific human capital (FSHC) restricts employee mobility, showing that perceived FSHC can actually enhance mobility.
The challenge
Driven by a firm’s unique routines and capabilities, firm-specific human capital (FSHC) is traditionally viewed as a means to deter employee mobility and sustain competitive advantage. This perspective is grounded in human capital theory, which assumes that the labour market can accurately value an individual’s skills and price them appropriately. However, this theory is being challenged by new viewpoints that suggest FSHC may not necessarily constrain mobility.
Instead, it could facilitate it, especially where firms are seeking workers who are capable of developing unique skills post-hire. Nonetheless, there is no substantial evidence supporting either stance, largely because it is unrealistic to assume that all labor market participants can value and price an individual’s skills similarly and accurately. This led us to explore how perceived FSHC—FSHC that realistically acknowledges variations in how labour market participants may value and price an individual’s skills—might influence mobility, introducing supply-side factors such as job satisfaction, workplace embeddedness, and a preference for job autonomy.
The research
Our research used surveys from distinct contexts in South Korea and the United States to examine the concept of perceived FSHC. We found this to be linked with very different attitudes and outcomes than those suggested by previous theories. Significantly, we discovered that perceived FSHC can indeed have a positive impact on mobility, contrary to the deterring effects attributed to actual FSHC. This relationship depends partly on the employee’s perceived fit with the firm, evidenced by job satisfaction and embeddedness, and is further amplified when they value autonomy within their role.
The impact
Our findings suggest that perceptions of FSHC are quite distinct from actual FSHC. Most importantly, perceived FSHC may lead to turnover as opposed to constraining mobility. This adds to the current research, which mainly focuses on the demand-side arguments about FSHC’s role in mobility. It also addresses the issue of aggregation bias, which tends to overstate the influence of demand-side factors in labour market studies. The recognition that labour market demand is not the sole factor behind mobility emphasizes the need for a more nuanced understanding of the interplay between perceptions and actual skills in the labour market.
