The importance of organizational context for the relation between human capital investment and firm performance: Evidence from labor unions

We study the importance of organizational context for the relation between human capital investment and firm performance. Using unique data from Korean listed firms, which were previously required to disclose information about union membership, we predict and find that the presence of unions attenuates the favorable relation between human capital investment and firm performance. We identify productivity, future employment, and cost behavior as channels through which this result could operate. Overall, we show that the benefits commonly associated with investments in human capital are contingent on attributes of the organization, including the presence of labor unions.