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Human Capital

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The resource based literature has stressed the importance of firm-specific human capital which is likely to generate organizational rents, since those assets are more likely to be unique, sporadic, and thus a better basis for sustainable advantage.
However psychological literature supports that generalized investments have value for the firm through it’s effects on worker’s commitment to the firm.
This paper examines the impact of firm’s specificity in human capital versus generalization commitment of externalized workers.
Externalized workers, face persistence pressure to maintain assets that are highly desirable in the market. Firms cannot offer lifetime contracts but nonetheless offer workers greater assurances of remaining competitive in the job market through more attention to general skills development and training. These skills increase the probabilities of the employees remaining employable, thus reducing their anxieties about the diminished job security (internal workers) or the stability of the employment relation (external workers), decreasing the likelihood of future or prolong unemployment. The study show more positive response in external workers when generalized investment by employers are made.
Firms often fear to invest in externalized labor but the potential positive effects it has on employee’s commitment level are valuable outcomes of firm’s investments in general skills development and other transferable resources.
The resource-based literature holds that the key strategic assets for a firm are its human capital. Loyalty and commitment are important sources of firm’s effectiveness, and it is worthwhile to increase commitment. Commitment vis-à-vis generalized investment can generate “rare” firm resources.

Strategic human resource management (SHRM) has suggested that human resource practices lead to higher firm performance through

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