Research On Asset Specificity Of Human Capital And Risk-prevention Mechanism

In knowledge economy it becomes common sense that knowledge means wealth. The problem on assets specificity of human capital becomes reality due to developments of social division and teamwork. In more words it means employees hold up enterprises using assets specificity of their human capital. Human capital of specificity is formed when employees invest in assets of specificity which means knowledge and skill which can only be used in their enterprises. Out of selfish motivation these human capital owners hold up enterprises due to asymmetric information and incomplete contract. Holding-up becomes mutual bargaining between enterprises and employees because enterprises can lock employees and employees will hold up their investment in human capital of specificity to protect themselves. This paper regards it a top priority to form a co-governance structure that formal capital owners and specificity assets owners share ownership of enterprises in order to solve the problem. Pure ownership arrangement can't solve the dilemma out of the reason that human capital specificity is implicit and hard to be observed and measured precisely. So this paper discusses the feasibility to make a psychological contract to solve the problem at the organization level.Firstly this paper makes a review of literature on human capital and lists out problems to solve. Secondly the author makes an analysis of assets specificity of human capital and explains the locking-up phenomenon. Afterwards, this paper introduces a risk-prevention mechanism to solve the dilemma. At last the author points out the shortcomings of this paper and probe into the future of the research in this field.