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Industrial policy, social capital, human capital, and firm-level competitive advantage

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Abstract

Despite the popularity of governmental action devised to foster firm performance, the link between industrial policy and firm-specific human capital and social capital has received scant attention in the strategic management literature. In this paper, we build a dynamic optimization model which bridges concepts from industrial policy, social capital, human capital, and firm-level competitive advantage. We derive theoretical and policy implications from our competitiveness model, concluding that it increases in the opportunity cost of social capital reduce the production of human capital, so the optimal opportunity cost of social capital under feasible industrial policy should be set equal to zero. A government’s optimal industrial policy to help accumulate and churn human capital should reduce the opportunity cost of social capital to zero and reduce the probability of human capital leaving the community to zero. Thus, the model not only expands the potential determinants of competitive advantage in the context of governmental intervention, but also broadens the human capital theory and social capital theory in the creation of firm-specific human capital.

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Acknowledgements

The authors acknowledge Professor Kun-Huang Huarng of Feng-Chia University and Professor Feng-Jyh Lin of Feng-Chia University for providing valuable suggestions and proofreading this paper. Bo-Xiang Hsu, Department of Asia-Pacific Industrial and Business Management, National University of Kaohsiung, Kaohsiung, Taiwan (E-mail: bx6426@nuk.edu.tw).

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  1. Department of Asia-Pacific Industrial and Business Management, National University of Kaohsiung, Kaohsiung, Taiwan

    Bo-Xiang Hsu

  2. Department of Asia-Pacific Industrial and Business Management, National University of Kaohsiung, 700 Kaohsiung University Road, Nanzih, Kaohsiung, 81148, Taiwan

    Yi-Min Chen

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Hsu, BX., Chen, YM. Industrial policy, social capital, human capital, and firm-level competitive advantage. Int Entrep Manag J 15, 883–903 (2019). https://doi.org/10.1007/s11365-019-00584-7

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