Does Firm-Specific Human Capital Decrease or Increase Employee Mobility?

Abstract

An ongoing debate in the field of strategic human capital is whether high levels of firm-specific human capital decrease or increase employee mobility. Some argue that firm-specific human capital limits employment options, thus reducing mobility, while others argue that it should increase mobility because a signal of employees’ willingness to make such investments is broadly valuable. Empirical findings using tenure as a measure provided mixed results. Addressing the puzzle, this paper suggests that whether firm-specific human capital decreases or increases employee mobility depends on the extent to which an employee’s current firm relies on team production to generate economic value. Analysis of linked employer-employee data on 1,024 R&D workers in acquired firms provides support for this idea. Implications for human capital theory are discussed.