Microfoundations of Firms’ Human Capital-Related Rents and Losses

Over the last two decades, human capital as a source of competitive advantage has been broadly discussed in the strategy literature. Much of this strategic human capital literature is focused around the concepts of firm specificity and isolating mechanisms and the theoretical logic thereof is concentrated accordingly on the upside potential of firms’ human capital at the macro level of analysis. In this paper, we take a closer look and the microfoundational mechanisms that impact both the upside and downside potential for human capital related value creation and appropriation. Specifically, we develop a reciprocally interdependent process model that is rooted in the bargaining process that determines human capital pricing and the management process that facilitates human capital-related value creation. We thus contribute to the strategic human capital literature by offering the manager and strategy scholar a broadened theoretical lens for under-standing the dynamic processes by which firms accrue rents or losses from their human capital.