Overcoming Human Capital Voids in Underdeveloped Countries

Global Strategy Journal, 7(1): 36-57, 2017

42 Pages Posted: 23 Mar 2017 Last revised: 14 May 2017

See all articles by Stephanie Lu Wang

Stephanie Lu Wang

University of Miami - Department of Management

Alvaro Cuervo-Cazurra

Northeastern University - Department of International Business and Strategy

Date Written: October 4, 2016

Abstract

We analyze how firms in underdeveloped countries overcome human capital voids – a prevalence of very low levels of skills among individuals – to improve performance. Building on the knowledge-based view, we argue that managers can strategically select organizational upgrading mechanisms to compensate for the negative impact of employees’ human capital deficiencies on firm performance improvement. We propose that external mechanisms (e.g., operating a joint venture with foreign partners) are better than internal ones (e.g., internal research and development), because external mechanisms provide ready-made knowledge that is appropriate for low-skilled labor to learn, whereas internal mechanisms create additional learning inefficiencies. However, in countries with more developed human capital, these influences change: external mechanisms have a lower compensating influence, while internal ones become less inefficient.

Keywords: Human capital voids; organizational upgrading mechanisms; knowledge-based view; performance; Sub-Saharan Africa

JEL Classification: L2, E2

Suggested Citation

Wang, Stephanie Lu and Cuervo-Cazurra, Alvaro, Overcoming Human Capital Voids in Underdeveloped Countries (October 4, 2016). Global Strategy Journal, 7(1): 36-57, 2017. Available at SSRN: https://ssrn.com/abstract=2939402

Stephanie Lu Wang

University of Miami - Department of Management

United States

Alvaro Cuervo-Cazurra (Contact Author)

Northeastern University - Department of International Business and Strategy ( email )

D'Amore-McKim School of Business
313 Hayden Hall, 360 Huntington Avenue
Boston, MA 02115
United States
16173736568 (Phone)
16173738628 (Fax)

HOME PAGE: http://cuervo-cazurra.com

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