Recognizing Risk in Human Capital Investments: A Real Options Approach to Strategic Human Resource Management
Bhattacharya, Mousumi; Wright, Patrick M.
An issue that has not yet been explored in the field of strategic human resource management (SHRM) is that of managing the ‘risks’ involved in human capital management of the firm. We address this issue using the real option theory framework. We argue that certain HR practices manage risk and generate opportunities for the firm by creating 'options' for its human capital management. These HR options help ensure stability of returns from human capital and thus sustain competitive advantage. Different types of HR options and the role of certain HR practices in creation of these options are discussed.
job; human resource; employee; work; firms; labor; market; skill; management; capital