Should companies invest in human resource development practices? The role of intellectual capital and organizational performance improvements

Purpose: In this study, the authors employ an intellectual-capital based view of the firm to examine the relationship between three bundles of human resource development (HRD) practices (i.e. developmental, constructive and collaborative HRD practices), three dimensions of intellectual capital (i.e. human capital, organizational capital and social capital), and organizational performance improvements. Specifically, the authors investigate the mediating role of intellectual capital in the relationship between HRD practices and changes in organizational performance. Design/methodology/approach: The authors randomly distributed questionnaires to 1,000 HR executives of Taiwanese firms to assess the firms' HRD practices and intellectual capital. Firm performance data in terms of return on assets (ROA) were obtained from the Taiwan Economic Journal (TEJ). To test the model, the authors used the longitudinal data over three years from 213 firms in Taiwan. Findings: The results show that human capital and social capital mediate the relationship between HRD practices (i.e. developmental and collaborative HRD practices) and organizational performance improvements in terms of return-on-assets growth. Originality/value: This study adds to the empirical evidence regarding whether or not investment in HRD practices can lead to positive changes in financial performance.