Building innovation capacity: the role of human capital formation in enterprises

There are a number of factors that affect enterprises’ ability to innovate. These include internal factors such as the ability to detect technological changes in the environment, the development of core competencies from which innovation can develop, and external factors such as the maturity of the market the enterprise serves and the impact of government policy on stimulating innovation. A range of studies have suggested that human factors within the enterprise are critical to innovation. However, these studies have not established exactly how human factors in enterprises improve the ability of enterprises to innovate. Direct links between human resource management (HRM) practices and learning and development practices and innovation performance at the enterprise level have been difficult to establish. We propose that the links between HRM and learning and development practices and innovation is a two-stage process. That is, HRM and learning and development practices contribute to the development of enterprise capacity to innovate. It is the development of innovation capacity that leads ultimately to improvements in enterprise innovation performance.