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Retaining skilled employees: A human capital model with innovation and entrepreneurship
Author(s) -
Sayili Koray
Publication year - 2020
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.3147
Subject(s) - human capital , entrepreneurship , principal (computer security) , economics , investment (military) , labour economics , capital (architecture) , empirical evidence , microeconomics , business , classical economics , market economy , finance , philosophy , archaeology , epistemology , politics , computer science , political science , law , history , operating system
In his seminal paper, Becker argues that firms never invest in general human capital in a frictionless labor market. Nevertheless, empirical evidence shows the opposite. This paper sheds light on this puzzle by developing a principal–agent model with human capital investments. The novel feature of the model is that specific human capital increases the agent's probability to innovate. Innovation brings the opportunity of entrepreneurship, which means losing a skilled agent for the principal. The results show that higher entrepreneurial income increases the risk of employee departure and the principal may use general human capital investment for retention.