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date: 21 August 2019

Abstract and Keywords

This article describes two dilemmas for organizations seeking to derive a competitive advantage from human capital (HC). First, the very qualities such as knowledge tacitness and causal ambiguity that make employees' HC valuable, inimitable, and a source of competitive advantage to firms, make it difficult for firms to acquire, organize, retain, and motivate those employees. Second, employees will inevitably seek to maximize their share of the rents accruing from organizational use of their capital through wages, expenses, and benefits, thus only a portion of the rents may flow to shareholders. Strategies to reduce dependency on employees' idiosyncratic HC through knowledge codification and routinization risk increasing imitability. Firms must therefore address these HC dilemmas directly. The article proceeds to analyse issues associated with gaining a competitive advantage from HC. It proposes several ‘coping’ strategies to address turnover and information dilemmas

Keywords: human capital, shareholders, knowledge codification, routinization risk, HC dilemmas

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