Theorising Human Capital Formation for Innovation in India's Global Information Technology Sector

Ashish Malik and Vijay Pereira


In recent years, many Anglo-Saxon countries, enterprises, and policymakers have attempted to address issues of competition and globalisation through appropriate interventions in their training systems. At a national level, investment in training has enhanced international competitiveness and minimised the risk of unemployment (ABS, 1994; OECD, 1994). At a policy level, much of the debate in the last two decades has focussed on the role of training in improving the competitiveness of firms (Malik & Rowley, 2015a; NTITSD, 1998; Pereira & Malik, 2015; Stevens & Walsh, 1991). However, research suggests that improvements at a national level can only occur in the context of improving training

A. Malik (и)

Newcastle Business School, Newcastle, NSW, Australia V. Pereira

University of Wollongong, Dubai, UAE University of Portsmouth, Portsmouth, UK

© The Author(s) 2017

S. Kundu, S. Munjal (eds.), Human Capital and Innovation, DOI 10.1057/978-1-137-56561-7_9

provision at a firm level (Cappelli, 1995; Porter, Schwab, Sala-I-Martin, & Lopez-Claros, 2004).

Further, innovation is seen as a source of sustained competitive advantage in hyper-competitive environments (Damanpour & Schneider, 2006). Recent research suggests an increasing number of firms in emerging markets are focusing on innovation and differentiation as a key strategy for achieving sustained competitive advantage (Govindrajan & Trimble, 2012; Kumar & Puranam, 2012). While the body of research on organisational level understandings of building innovative capacity is well established (Prajogo & Ahmed, 2006; Smith, Courvisanos, Tuck, & McEachern, 2012), there exists a limited understanding of the microindividual) level foundations of the role of cognitive and non-cognitive abilities of individuals in building innovative capacity. Investment in training and fostering a learning culture (Foss & Larsen, 2003; Mark & Akhtar, 2003) has been noted to be key stimuli for building a firm’s innovative capacity. More recently, academics have link learning in organisations with their ability to innovate as well as develop their innovation capability (Akbar & Tzokas, 2013; Alegre & Chiva, 2008; Garcia- Morales, Llorens-Montes, & Verdu-Jover, 2007). Further, as Zeytinoglu and Gordon (2009) note through employer-funded training, firms can develop increased levels of innovation capability as they often engage in sharing their new knowledge and provide feedback to the employees. Such an approach is typical of firms who are committed to learning (Jeon & Kim, 2012).

In this conceptual chapter, using Dubin’s (1978) hypothetico-deductive approach to theory-building, we attempt to model the various macro-, micro-, and meso-level influences on human capital formation and innovation in the context of India’s high-technology information technology (IT), business process outsourcing (BPO), and IT product development (ITPRD) firms. The rest of this conceptual, theory-building chapter is organised as follows. First, we begin with a brief review of human capital formation in the firms in general, considering the factors that trigger and stabilise skill formation, with a specific focus on the Indian IT industry. Second, we provide a brief overview of the research context for setting the boundaries to which this theorisation is applicable. Next, we elaborate on Dubin’s (1978) hypothetico-deductive approach to theory-building that a researcher-theorist must embrace before proposing their theorisation. It is in this major piece of review and theorisation that we identify the key units of our theory and propose our theoretical framework of theorising human capital formation for innovation in India’s IT sector. In the subsequent sections, we outline the laws of interactions between the various units of theory and present a conclusion with directions for researcher-theorists to empirically test our theory.

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