The Role of HRD in Economic Development
Suhail S. Zidan
Beyond its effects on individuals and organizations, HRD also carries with it the potential for economic development beneﬁts at the societal level. The literature suggests six causes of economic development: (1) foreign trade, (2) technological transfer, (3) resource allocation, (4) structural transformation, (5) human capital formation, and (6) savings and investment (Hagen, 1986; Loehr and Powelson, 1981). The focus of this article is on the role of HRD on the last two causes of economic development: human capital formation and savings and investment. Speciﬁcally, I discuss the relationship between human capital and HRD, describe the research context that takes place at the encounter point between less-developed countries (LDCs) and a multinational enterprise (MNE), and propose a set of research questions to guide future research.
Human Capital and HRD
There is general agreement that human capital formation is one of the critical causes of economic development. Human capital is deﬁned as the productive investments in humans, including their skills and health, that are the outcomes of education, health care, and on-the-job training (Todaro, 1994). The relationship between human capital theory and human resource development stems from their focus on the use of the labor force in the process of economic productivity, in the broader sense of the term. In his inﬂuential book on human competence, Gilbert (1996) states: “The purpose of performance engineering is to increase human capital, which is deﬁned as the product of time and opportunity” (p. 11). Human capital theory is an economic theory that addresses the macroeconomics of production and economic development. It views human capabilities—their knowledge, skills, health, and efforts—as integral parts of the capital of a country, along with ﬁnancial and natural resources. The premise of this theory is that investments made in educating the workforce and FORUM
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HUMAN RESOURCE DEVELOPMENT QUARTERLY, vol. 12, no. 4, Winter 2001 Copyright © 2001 John Wiley & Sons, Inc.
developing their skills (among other services such as providing them with nourishment and maintaining their health) would pay dividends for a country in its effort to develop economic viability and contribute to an increase in output per each unit of input (Hogendorn, 1996). The human capitalist approach studies the cost-beneﬁt of such investment in terms of its efﬁciency in reaching equilibrium in the amount of investment in education, as opposed to investment in other factors of production, for the purpose of maximizing the return on investment. Similarly, HRD views humans as resources to be trained, educated, and developed within the system of an organization for the purpose of enhancing the productivity of the organization through the expertise of its workforce. Jacobs (1990) and Swanson (1995), among others, have characterized HRD as a multidisciplinary ﬁeld of study. As shown in Figure 1, they identify economics as an important discipline that contributes to the theoretical basis of HRD. Economics and human capital theory have become important foundational ingredients for HRD theory and practice. Moreover, in his ﬁrst editorial for the commencement of HRDQ, Swanson (1990) divided the contents of HRD into two components: (1) human development (psychology and education) and (2) human capital (economics and management). Carnevalle, Gainer, and Villet (1990), in taking a human capital approach, place HRD at the strategic level within the organization. They view employees as a resource that must be trained in order to maintain the competitive advantage of the corporation and increase its value. In this perspective, HRD activities (speciﬁcally, training) become utilitarian in the organizational strategy to keep up with economic and technological...
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The Role of HRD in Economic Development
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Suhail S. Zidan is a doctoral candidate in workforce development and education with an emphasis on human resource development at the Ohio State University, Columbus, Ohio.
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