Abstract

Ever since Becker’s (1962, 1964) salient work on human capital, management scholars aim to determine whether and how human capital affects firm performance. While a positive link has been established between different dimensions of human capital and firm performance (Unger et al., 2009), this empirical work has added only limited insight into how and why these performance effects substantiate. Moreover, a documented difference between the impact of education and work experience on firm performance raises many questions about the mechanisms that link human capital and performance. In search of the missing link(s) between human capital and firm performance, we analyze the fundamental approach individuals follow to determine a course of action and organize their managerial work i.e., whether and to what extent they engage in business planning (Brinckmann et al. 2010). We argue that individuals with greater work experience deploy a planning approach in a more contingent fashion than those with education-based human capital who primarily focus on business planning. Following these arguments, we study whether the business planning approach mediates both the education and the experience based SME performance relationship.

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