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The long-term effect of training and development investment on financial performance in Korean companies

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  • Kibum Kwon

Abstract

Purpose - The purpose of this paper is to examine the relationship between training and development investment and financial performance over time. Human capital literature suggests that training and development investment may not immediately affect financial performance but may instead create effects that are realized over time. However, most existing cross-sectional research explores the influence of training and development investment on performance while overlooking training and development investment’s long-term effects. Design/methodology/approach - This study focuses on the recovery period following the Great Recession circa 2008 in the South Korean business context. Longitudinal data from 312 firms, including four distinct waves, were used. Latent growth modeling was used to help identify a pattern of reciprocal relationships between training and development investment and financial performance over time. Findings - The results indicate that even though growth in training and development investment is stable over time, there are significant between-firm differences in training and development investment trajectories over time. Prior financial performance was shown to be positively related to higher levels of training and development investment, but it was not related to growth in training and development investment. The initial level of training and development investment did not predict subsequent profit, but growth in training and development investment was positively related to future financial performance. Originality/value - This study suggests that as an organization’s training and development investment increases over time, a delayed effect on financial performance may emerge because of this accumulated investment. Ultimately, the results highlight the importance of having a stock of human capital, rather than concentrating upon momentary flows that yield immediate effects.

Suggested Citation

  • Kibum Kwon, 2019. "The long-term effect of training and development investment on financial performance in Korean companies," International Journal of Manpower, Emerald Group Publishing Limited, vol. 40(6), pages 1092-1109, January.
    • Handle: RePEc:eme:ijmpps:ijm-10-2017-0286
    DOI: 10.1108/IJM-10-2017-0286
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    Citations

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    Cited by:

    1. Castillo Apraiz, Julen & Matey de Antonio, Jesús, 2020. "The mediating role of personnel training between innovation and performance: Evidence from the German pharmaceutical industry," Cuadernos de Gestión, Universidad del País Vasco - Instituto de Economía Aplicada a la Empresa (IEAE).
    2. Mohammad Tariqul Islam Khan, 2022. "Determinants and preferences for a crowdfunding project," Future Business Journal, Springer, vol. 8(1), pages 1-12, December.
    3. Chatterjee, Sheshadri & Chaudhuri, Ranjan & Grandhi, Balakrishna & Galati, Antonino, 2023. "Evolution of strategy for global value creation in MNEs: Role of knowledge management, technology adoption, and financial investment," Journal of International Management, Elsevier, vol. 29(5).
    4. Akriti Gupta & Aman Chadha & Vijayshri Tiwari & Arup Varma & Vijay Pereira, 2023. "Sustainable training practices: predicting job satisfaction and employee behavior using machine learning techniques," Asian Business & Management, Palgrave Macmillan, vol. 22(5), pages 1913-1936, November.

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