The Human Resource Management Theory Of The Human Capital Theory

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Since 1964, when the economist Gary Becker introduced the concept of the “human capital theory”, the field of human resource management has seen an increase in interest and commitment placed towards researching more effective practices of HRM. According to Wright, McMahan, and McWilliams (1994), this increase in commitment can be seen as a result of many factors including the aim to develop employee skills, increase satisfaction, and also as a way to keep a competitive advantage over competitors (as cited in Ballesteros-Rodriguez , De Saá-Perez , & Domínguez-Falcon, 2012). Furthermore, the increased commitment towards researching more effective practices of HRM recognizes the importance that such practices have towards improving the skills and performance of employees (Wright & Boswell, 2002). Several forms of HRM practices exist including the performance-based incentive practice in which companies make an investment by providing bonuses to their employees based on employee performance. Ultimately, companies hope that this investment will result in improved employee work performance and thereby overall company success (Gerhart, Rynes, & Fulmer, 2009). The practice of rewarding employees with bonuses due to the successful completion of work goals has long been studied and is subsequently supported by several economic theories including the expectancy theory (Vroom, 1964) , and the reinforcement theory (Hamner, 1975) (as cited in Bareket-Bojmel, Hochman, & Ariely, 2014) .

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