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The virtuous circle of human resource investments: A precrisis and postcrisis analysis
Author(s) -
RocaPuig Vicente,
BouLlusar JuanCarlos,
BeltránMartín Inmaculada,
GarcíaJuan Beatriz
Publication year - 2019
Publication title -
human resource management journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.44
H-Index - 77
eISSN - 1748-8583
pISSN - 0954-5395
DOI - 10.1111/1748-8583.12213
Subject(s) - profitability index , investment (military) , productivity , virtuous circle and vicious circle , business , resource (disambiguation) , sample (material) , human resources , industrial organization , labour economics , operations management , economics , finance , management , economic growth , computer science , computer network , chemistry , chromatography , politics , political science , law , macroeconomics
We propose a dynamic model of positive feedback between human resource (HR) investments and companies' economic performance. The model assumes that HR investment increases profitability through labor productivity and, in turn, profitability improves HR investment through organizational slack. Based on data from a sample of 2,497 industrial companies over a 7‐year period (2005–2011), longitudinal analysis corroborates the existence of a two‐way relationship between HR investment and profitability over time. However, the emergence of an economic crisis weakens this feedback, identifying the effect of organizational slack on HR investment as the weakest causal chain link. In a postcrisis period, HR investment is not such a high priority for managers.