The Role of Human Capital and Knowledge Management in Innovation

Abstract

The purpose of this study was to examine the impact of human capital and knowledge management in innovation. This study was conducted in Indonesia. Research respondents were bank employees who had structural positions. Data had been collected by using a survey with questionnaires. Based on data analysis by using Partial Least Square (PLS smart 3.0), this study found a direct relationship between human capital and innovation but not significant. However, surprisingly we found that it had significant indirect impact through knowledge management as a mediator. Human capital also had significant direct effect on knowledge management. Knowledge management had significant direct effect on innovation. Implications of this study results suggest and reinforce that knowledge management is not a major determinant to create innovation, but its presence is an important input from the implementation of human capital, in order to improve innovation.