• Habiba Dalhatu Ibrahim

According to Schultz (1993), the term “human capital” has been defined as a key element in improving a firm assets and employees in order to increase productive as well as sustain competitive advantage. To sustain competitiveness in the organization human capital becomes an instrument used to increase productivity. Human capitals refer to processes that relate to training, education and other professional initiatives in order to increase the levels of knowledge, skills, abilities, values, and social assets of an employee which will lead to the employee’s satisfaction and performance, and eventually on a firm performance. Rastogi (2000) stated that human capital is an important input for organizations especially for employees’ continuous improvement mainly on knowledge, skills, and abilities. Thus, the definition of human capital is referred to as “the knowledge, skills, competencies, and attributes embodied in individuals that facilitate the creation of personal, social and economic well-being” (Organization for Economic Co-Operation and Development or OECD, 2001: 18).” The constantly changing business environment requires firms to strive for superior competitive advantages via dynamic business plans which incorporate creativity and innovativeness. This is essentially important for their long term sustainability. Human resource input plays a significant role in enhancing firms’ competitiveness (Barney, 1995). At a glance, substantial studies were carried out on human capital and their implications on firm performance were widely covered and obviously, human capital enhancement will result in greater competitiveness and performance (Agarwala, 2003; Guthrie et al., 2002). Meantime, there is a significant relationship between innovativeness and firm performance under the human capital philosophy (Lumpkin & Dess, 2005). In relation to this, the definition of firm performance could vary from one and another. Some clear definitions of firm performance in the context of human capital enhancement could be put forward.

Human capital is the stock ofknowledge, habits, social and personality attributes, includingcreativity, embodied in the ability to performlaborso as to produce economic value. Alternatively, Human capital is a collection of resources all the knowledge, talents, skills, abilities, experience, intelligence, training, judgment, and wisdom possessed individually and collectively by individuals in a population. These resources are the total capacity of the people that represents a form of wealth which can be directed to accomplish the goals of the nation or state or a portion thereof, It is an aggregate economic view of the human being acting within economies, which is an attempt to capture the social, biological, cultural and psychological complexity as they interact in explicit or economic transactions.

Many theories explicitly connect investment in human capital development to education, and the role of human capital in economic development, productivity growth, and innovation has frequently been cited as a justification for government subsidies for education and job skills training.

Human capital has been and is still being criticized in numerous ways; Michael Spenceoffers signaling theory as an alternative to human capital. Pierre Bourdieuoffers a nuanced conceptual alternative to human capital that includes cultural capital, social capital, economic capital, and symbolic capital. These critiques, andother debates, suggest that “human capital” is a reified concept without sufficient explanatory power.

It was assumed in early economic theories, reflecting the context, i.e., the secondary sector of the economy was producing much more than the tertiary sector was able to produce at the time in most countries to be a fungible resource homogeneous, and easily interchangeable, and it was referred to simply as workforce or labor, one of three factors of production(the others being land, and assumed-interchangeable assets of money and physical equipment). Just as land became recognized asnatural capitaland an asset in itself, and human factors of production were raised from this simple mechanistic analysis tohuman capital. In modern technical financial analysis, the term “balanced growth” refers to the goal of equal growth of both aggregate human capabilities and physical assets that produce goods and services.

The assumption that labor or workforces could be easily modeled in aggregate began to be challenged in 1950s when thetertiary sector, which demanded creativity, begun to produce more than thesecondary sectorwas producing at the time in the most developed countries in the world. A measure of the economic value of an employee’s skill set. This measure builds on the basic production input of labor measure where all labor is thought to be equal. The concept of human capital recognizes that not all labor is equal and that the quality of employees can be improved by investing in them.