The role of human capital philosophy in promoting firm innovativeness and performance: Test of a causal model

In the present study, we developed and tested a causal model of the relationships between firm strategy, industry environment, human capital philosophy, innovativeness, and firm performance. Our results indicate that a differentiation-oriented strategy influences the relative use of an empowerment-oriented human capital philosophy of the firm, moderated by a firm's industry environment. Moreover, firms' human capital philosophies moderated the relationship between strategy and firm innovativeness. We also found support for the proposition that innovativeness mediated the relationship between human capital philosophy and firm performance. In addition, results also indicate that industry dynamism influences new product sales directly and industry survival difficulty moderates the relationship between firm strategy and new product sales. Survival difficulty also had a negative effect on firm profit. Overall, we found support for the mediating roles of human capital philosophy and innovativeness in the relationships between firm strategy, industry environment and firm performance. Implications are discussed.