The Impact of Human Capital Quality on the Boundaries of the Firm in the US Telecommunications Industry

Sumit K Majumdar ()

Industrial and Corporate Change, 1998, vol. 7, issue 4, 663-77

Abstract: Based on firm-level data for local operating companies in the US telecommunications industry, this paper explores how human capital of higher quality enhances the firms' abilities to enjoy increasing returns and enables them to increase the scale of various activities. Specifically, the ability of telecommunications firms to increase the deployment of switches, enhance the infrastructure of lines and increase headcount is assessed. The payment of efficiency wages is meant to enable firms to attract human capital of higher quality. Based on the literature, the payment of efficiency wages is captured as the average wage payment per employee. After controlling for scale effects, human capital quality and other variables significantly impact the companies' abilities to exploit increasing returns and enhance the scale of their operations, as measured in a disaggregated manner, for a variety of activities. Copyright 1998 by Oxford University Press.

Date: 1998
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