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How do interdependencies among human-capital deployment, development, and diversification strategies affect firms' financial performance?

Book or journal references : Strategic Management Journal, vol. 26, pp. 967-985 (2005).

Author(s) : Kor , Y. Y. and Leblebici , H.

Abstract :

Using key insights from the resource-based view of the firm, we develop and test a theory of how firms can successfully deploy and develop their strategic human assets while managing the trade-offs in their service and geographical diversification strategies. In a sample of large law firms we find that, even though firms profit from expert human-capital leveraging strategy and service and geographical diversification strategies individually, pursuing these strategies simultaneously at high levels produces negative interaction effects on firm profitability. In addition, the internally developed, firm-specific associate human capital strategically fits better with high levels of expert human-capital leveraging. While lateral hiring helps firms build new knowledge bases and take advantage of growth opportunities, pursuing high levels of both expert human-capital leveraging and lateral hiring of associates results in lower profitability. To fully capture the economic benefits from strategies of diversification, human-capital leveraging and lateral hiring, firms should understand and manage the complex interdependencies among multiple levels of strategy. Copyright (c) 2005 John Wiley & Sons, Ltd.


Keywords :

resource-based view; diversification strategy; human resources; firm performance; professional service firms HUMAN-RESOURCE MANAGEMENT; SUSTAINABLE COMPETITIVE ADVANTAGE; PROFESSIONAL SERVICE FIRMS; CORPORATE-LAW FIRM; ECONOMIC-PERFORMANCE; INTANGIBLE RESOURCES; PERSPECTIVE; CAPABILITIES; VIEW; COMPETENCE

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