Human Capital in SMEs Life Cycle Perspective

Abstract

In tandem with globalization and rapid changes in technology, the role of SMEs in enhancing economy development and employment becomes more crucial despite resource constraints. The emergence of a knowledge economy requires SMEs to be embedded with intellectual capital, namely human capital, structural capital and relational capital in order to compete in the resilient business environment. Given the unique characteristics of SMEs, prior studies revealed that human capital has the strongest influence on SMEs’ performance than the other sub-elements of intellectual capital. The changes in the business environment force firms to alter their strategies in achieving their stated goals. Hence, to align between the changes in the environment and the firm's structures, systems and processes, the role of human capital must be properly identified and distinguished according to the needs in different life cycle stages. The contributions of human capital in the early stages are found to be more significant than later stages. Therefore, the aims of this conceptual paper are twofold. The paper will highlight the contribution of human capital in business performance, followed by the role of human capital in the different life cycle stages of SMEs.