Training Investments and Innovation Gains in Knowledge Intensive Businesses: The Role of Firm Level Human Capital and Knowledge Sharing Climate

ABSTRACT Training investments are important in securing innovation gains. However, research on this relationship in knowledge intensive businesses is nascent. In particular, questions remain concerning what value different types of training hold for different types of innovation, and what mechanisms underpin these relationships. Drawing on human capital resources theory and collective learning theory, we develop and test a model explicating how specific and general training investments, through firm level human capital, lead to incremental and radical innovation. Additionally, we propose and investigate the supposition that the predicted positive relationships between training investments, firm level human capital, and innovation will be stronger when knowledge sharing climate is high. We test our model with two‐wave, multi‐respondent panel data gathered from 816 knowledge intensive businesses in France, Finland, Sweden, and the UK. We find that specific training is positively related to incremental innovation but not radical innovation, whereas general training is positively related to both types of innovation. With respect to firm level human capital, we find that it mediates these relationships and they are stronger when knowledge sharing climate is high. Furthermore, our analysis reveals that knowledge sharing climate moderates both the relationship between the two types of training investments examined and firm level human capital, and the indirect relationship via firm level human capital to incremental and radical innovation. We discuss the implications for theory, research, and practice.