This paper examines the questions of how important human capital is for business success. With this intention it is first defined what human capital is before there are evaluated several measurement approaches concerning the valuation of human capital in a company. Consequently, embedded into a case study, the value of this asset is calculated with the Lev & Schwartz model at an Indian tech company called Infosys technology limited. As a result of the case study it is pictured that human capital and the returns of Infosys are highly correlated, which underlines the hypothesis that human capital is a key factor for business success. To generalise the stated findings there is also a view on a macro economical level. The main result of this paper is that human capital actually can be said to be the most important aspect for business success. In a last part the author criticises that many companies do not pay enough attention at human capital.
Table of Contents
4. Introduction
4.1 Statement of the research question
4.2 Ambition and approach
5. Definition and differentiation
6. Evaluating human capital
6.1 Methods to evaluate human capital
6.2 Case study part one: Evaluating human capital at ITL
7. The impact of Human Capital on business success
7.1 Case study part two: The impact of human capital at ITL
7.2 The impact of human capital on business success in general
8. Analysis and discussion
9. Conclusion and outlook
10. Bibliography
Research Objectives and Themes
This paper investigates the strategic importance of human capital for business success by defining the concept, evaluating measurement models, and conducting a case study on Infosys Technology Limited to analyze the correlation between human capital investment and corporate returns.
- Theoretical definition and differentiation of human capital.
- Methodological evaluation of human capital valuation approaches.
- Case study analysis using the Lev & Schwartz model at Infosys.
- Examination of the correlation between human capital and business revenue.
- Macro-economic perspective on human capital as a driver of growth.
Excerpt from the Book
4.1 Statement of the research question
Modern economies have changed from agricultural to industrial to service- and technology based economic systems. As a result the intangible assets of a company can be more and more identified as the key value drivers for business success. Tangible assets on the other hand diminished in value and have lost importance as success drivers. These circumstances manifest themselves in numerous companies as a value gap between market value and, in comparison to this, low reported equity. Besides brand value, customer relations or patents the high amount of intangible assets is mainly reasoned by Human Capital (Human Capital = HC). Due to its importance for economic success and social development the HC has become to a prioritised topic among science during the last century. According to Stewart (1998) the HC of a company will even be the only factor of production that can be further developed and is able to increase a companies value in the future. Therefore HC can also be described as a key driver for competitive advantage.
Stated the fact that the impact of HC is gaining importance and is becoming more and more crucial for business success, it should be easy to claim that companies should invest in this asset without any doubts. However, this statement is not that easy to prove. This is reasoned in the fact that the impact of HC actually is not that simple to measure, simply because it is an intangible asset. This problem is not only relevant for the valuation of a company, it is also a problem concerning the question if investments in HC actually pay off. Needless to say, companies need evidence concerning the profitability of their investments. Therefore the question we are facing is not only if HC really is a key factor for business success, previously there has to be a consideration about how to measure the worth of HC and mainly how big the impact it concerning business success actually is.
Summary of Chapters
4. Introduction: Outlines the shift in modern economies towards intangible assets and establishes the research focus on the impact and measurement of human capital.
5. Definition and differentiation: Explores various academic definitions of human capital, distinguishing between individual and entrepreneurial perspectives.
6. Evaluating human capital: Discusses diverse methodologies for measuring human capital and introduces the Lev & Schwartz model as a practical tool for valuation.
7. The impact of Human Capital on business success: Analyzes empirical data from Infosys Technology Limited and broadens the discussion to the macro-economic influence of human capital on growth.
8. Analysis and discussion: Synthesizes the research findings, highlighting the discrepancy between the recognized importance of human capital and its current low prioritization in German corporate accounting.
9. Conclusion and outlook: Summarizes the key insights and reaffirms human capital as a vital, albeit challenging to measure, factor for long-term business success.
10. Bibliography: Lists the academic sources and references utilized throughout the research paper.
Keywords
Human Capital, Intangible Assets, Business Success, Lev & Schwartz Model, Infosys Technology Limited, Human Resource Accounting, Economic Growth, Valuation Methods, Corporate Performance, Knowledge Economy, Intellectual Capital, Investment Analysis, Competitive Advantage, Personnel Management, Labor Productivity.
Frequently Asked Questions
What is the core focus of this research paper?
The paper focuses on the significance of human capital as a key driver for business success, examining how it can be defined, measured, and practically valued within a corporate environment.
What are the central themes discussed in the work?
The central themes include the transition of economies toward intangible value drivers, the challenges of measuring human capital, and the correlation between human capital investment and corporate financial performance.
What is the primary objective of this study?
The primary objective is to provide evidence that human capital is a key factor for business success and to illustrate how such an intangible asset can be quantified using established financial models.
Which scientific methods are employed in this research?
The paper utilizes a literature review for theoretical foundations and a case study approach, specifically applying the Lev & Schwartz model to evaluate the human capital of Infosys Technology Limited.
What topics are covered in the main body of the work?
The main body covers the definition of human capital, an overview of cost- and future-oriented evaluation methods, a detailed case study of an Indian IT company, and a macro-economic analysis of human capital's impact on growth.
Which keywords best characterize this research?
Key terms include Human Capital, Intangible Assets, Business Success, Lev & Schwartz Model, and Human Resource Accounting.
How does the Lev & Schwartz model function in the context of this paper?
The model is used to estimate the value of an organization's human capital based on the discounted future income streams of its employee groups, serving as a practical tool for valuation.
Why does the author critique the status of human capital in many companies?
The author criticizes that despite its proven importance for success, many companies—particularly in Germany—fail to implement systematic human capital management or monetary valuation in their accounting.
- Quote paper
- David Baur (Author), 2018, Human Capital as Key Factor for Business Success. The Importance of Human Capital, Munich, GRIN Verlag, https://www.grin.com/document/988691
