When a company is very dependent on firm-specific human capital, it makes sense for the company to:

Question

Quizplus · Accepted Answer

A company with firm-specific human capital relies heavily on the skills and knowledge of its employees to maintain its competitive edge. Therefore, creating an extensive internal labor system for career advancement would help incentivize employees to stay with the company and continue developing their skills, while also providing a clear path for advancement within the organization. This would help the company retain its valuable human capital while also ensuring that employees feel valued and supported in their professional growth. Offering compensating differentials for hardships or sending employees to a local university may be relevant in other contexts, but in this case, the best option is to focus on internal career development opportunities. Using only benchmark competitive wage rates may not be effective in retaining highly skilled employees who can command higher pay elsewhere.

When a Company Is Very Dependent on Firm-Specific Human Capital