Firm-Explicit Human Capital: Understanding the Value of Transferable Firm Knowledge in the Labor Marketplace
Management and Entrepreneurship
An executive's firm-specific human capital is argued to be a critical resource to the executive's current organization, but because of its lack of transferability, is of little value outside the firm. We argue that there exists a form of firm-based knowledge, which we term firm-explicit human capital, that is, in fact, transferable to competing firms, and that these firms will be willing to pay a premium to obtain it. Using a sample of over 9,000 executives, we show that executives switching to competing firms received increases to base pay greater than non-movers and those moving within or between industries. We suggest these increases are reflective of the differential value associated with various forms of executive-level human capital and we discuss the implications of our findings for future human capital research.