How Does Human Capital Foster Product Innovation? The Contingent Roles of Industry Cluster Features

Abstract

Although it is well recognized that human capital is an important strategic asset for firms, the evidence regarding its role in developing new products is inconclusive. Prior research has overlooked the contingent role of industry clusters in the relationship between human capital and product innovation. This study suggests that organizational learning and resource availability from industry clusters shape the relationship between human capital and innovation. Using multilevel and multisource onsite survey data from 236 firms in 36 Chinese township clusters, we find that the positive effect of human capital is weaker when firms learn more from inside industry clusters and is stronger when firms learn more from outside clusters. Moreover, human capital has a stronger positive effect on innovation among firms that are located in clusters with more spinoffs. These findings provide novel insights into how human capital can be matched with the features of clusters to foster innovation.