The Differing Effects Of Human And Social Capital On Employees’ Strategic Orientation: A Knowledge-Based Perspective

Drawing on the knowledge-based view, researchers have noted that both human and social capital contribute to the firm’s ability to compete and achieve competitive advantage.  Nonetheless, it is unclear how each one differs from the other in influencing achievement of the firm’s strategic priorities. The purpose of this research is to gain insight into this issue by considering how the nature of knowledge embedded in human and social capital influences employees’ orientation towards two key strategic priorities discussed in the literature—low cost and differentiation. We argue that the more specialized knowledge embodied in human capital will enhance their orientation towards low cost or productivity goals, while greater appreciation for others’ knowledge created through social capital will increase employees’ orientation towards differentiation or quality. Using a unique database of manufacturing employees’ work-related knowledge, our findings support our arguments in this regard. These findings suggest that human and social capital play important yet highly contrasting roles within the firm.