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You Get What You Pay For: Human Capital Impact on Organizational Performance in Portugal

Author

Listed:
  • Portovelo, Ligia
  • Veloso, Ana
  • Portela, Miguel

Abstract

The neoliberal trend in human resource management has been to increase corporate profits by cutting personnel expenses. Mean while, corporate leaders continue to give official speeches clamming that people are their greatest asset. By applying a longitudinal approach to the organizational scope of the phenomenon, we explored the possible relationship between investment in human capital and organizational performance in Portuguese companies from 2010 to 2016. Our findings indicated that a 1% increment in investment in human capital increased gross value added by 0.63% the same year, and by 0.65% if the increase remained consistent over 2 years. The organizational context in which behaviours occurred, represented by the life cycle stage variable, also positively impacted performance, especially when investment in human capital was made in stage 4- decline. Our findings led us to conclude that cutting personnel expenses is detrimental to company performance and contributes to poorer business results.

Suggested Citation

  • Portovelo, Ligia & Veloso, Ana & Portela, Miguel, 2024. "You Get What You Pay For: Human Capital Impact on Organizational Performance in Portugal," Revista Galega de Economía, University of Santiago de Compostela. Faculty of Economics and Business., vol. 33(3), pages 1-22.
  • Handle: RePEc:sdo:regaec:v:33:y:2024:i:3_3
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    File URL: https://revistas.usc.gal/index.php/rge/article/view/9746/14137
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    More about this item

    Keywords

    Human capital theory; Inestment in human capital; Organizational context; Organizational performance; Strategic HRM;
    All these keywords.

    JEL classification:

    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
    • M54 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Management
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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