INDUSTRY COMPETITION AND FIRM HUMAN-CAPITAL

This paper argues that objective and subjective human capital may have substantial impact upon organizational performance in a competitive c ontext. Objective human capital pertains to such features as education and experience, whereas subjective human capital relates to personali ty characteristics. The argument is illustrated by presenting the resu lts of two empirical studies: (1) a cross-section 1990-1991 analysis o f about 50 incumbents in the Flemish furniture industry - concentratin g on the impact of subjective human capital, particularly the Chief Ex ecutive Officer's (CEO's) locus-of-control personality, on financial p erformance; and (2) a longitudinal 1970-1992 analysis of a cohort of 1 00 entrants into the Dutch audit industry - focusing on the influence of objective human capital, particularly education and experience, on exit by merger and acquisition (M&A) or ''diaspora''. Both studies sup port the claim that objective and subjective human capital matters: fo r example, Flemish furniture firms headed by a CEO with an internal lo cus-of-control trait reach higher levels of financial performance, and Dutch audit firms with a high proportion of personnel with business e xperience are more likely to exit the industry over the years as a res ult of diaspora. Finally, the data of the Flemish furniture and Dutch audit industries are re-analyzed so as to compare the impact of human capital variables on small-firm performance in both industries. This r e-analysis reveals that in both industries the impact of human capital variables is more pronounced in large firms compared to small busines ses.