Development of a conceptual framework on real options theory for strategic human resource management

Abstract

Purpose

The purpose of this paper is to propose a conceptual real options theory framework for the firms to use options to mitigate both investment risks and retention of the trained human resources.

Design/methodology/approach

This conceptual paper is built with logical argumentation.

Findings

The growth of IT firms has created a demand for quality IT industry employees in substantive quantity in India. IT firms provide training and development (T&D) inputs for developing better skills of employees for better employee and superior firm performance. T&D input requires firm investment. It also creates enhanced market demand for the trained employee. High growth area like IT firms not only competes for market but also for employees. A trained employee might leave the firm that provided the training to join a rival firm which offers relatively better salary, a catch -22 situation. This paper develops a real options-based framework for strategic human resource management (HRM).

Research limitations/implications

This work integrates the theory of real options and strategic HRM.

Originality/value

This conceptual work is one of the first attempts to use real options theory on strategic HRM.

Citation

Bhattacharyya, S.S. (2018), "Development of a conceptual framework on real options theory for strategic human resource management", Industrial and Commercial Training, Vol. 50 No. 5, pp. 272-284. https://doi.org/10.1108/ICT-07-2017-0061