Combining Individual and Firm-level Human Capital Resources: The Creation and Performance Benefits of Human Capital Alignment

Abstract

We investigate how alignment between firm and individual-level human capital resources influences firm performance. We argue that a high degree of alignment between the firm and individual levels increases human capital utilization, coordination, and transfer. Drawing on Utah residential real estate data from 1996-2014, we find that brokerages with higher brokerage-agent human capital alignment engage in more transactions than brokerages with lower alignment. These benefits increase with firm size. We also find that individual-level human capital similarity in the first year significantly influences firm-individual alignment in subsequent years. These results suggest that managers from founding onward must carefully craft and manage alignment in individual and firm-level human capital resources to generate persistent performance advantages that are resistant to turnover and difficult for competitors to replicate.

Keywords: Human capital, microfoundations, real estate, utilization, complementarities, aggregation