The Impact of Human Capital on company performance Case of the footwear Sector in Ethiopia

Abstract

Human capital is getting wider attention with increasing globalization and also the saturation of the job market due to the recent downturn in the various economies of the world. Developed and developing countries put emphases on a more human capital development towards accelerating the economic growth by devoting necessary time and efforts. Thus human capital development is one of the fundamental solutions to enter the international arena. Specifically, firms must invest necessary resources in developing human capital which tend to have a great impact on performance. There is some emerging evidence that human capital investment leads to greatercompany performance particularly in small enterprises. This study adopts the human capital theory to address this gap in knowledge.A survey research design was adopted to testthis proposition using a sample of 143 small scale Footwear sector in Addis Ababa,Ethiopia. Estimation results using a regression model indicates that having human capitalinvestmentin company lead to the improvedCompany Performance. The findings of this study have important implications for theory, policy and practice. An important theoretical contribution of this study relates to its application of the human capital theory to examine the drivers of Company Performance by small firms in a developing economy. Another theoretical significance of this study relates to the ability of this study to link human capital theory and the concept of performance empirically.