Human capital and agency theory

This article considers the 'obvious' relationship between human capital (HC) and agency theory (AT) with two goals in mind. First, to show how principal-agent theory (PAT) - the AT variant most understood by agency theory - clarifies HC as a way of describing individuals in the organizational context. Second, to explore how PAT's own shortcomings illuminate possibilities implicit but underexplored in the HC literature; for while a workplace relationship between PAT and HC seems obvious, it is conceptually complicated. The article begins with a review of the two concepts' history and the research programs from which they emerged. After considering the PAT-HC interaction, it shows how HC might contribute to the theory of the firm. Many see the firm as a socioeconomic context in which HC and agency issues collide under management's direction as other forms of capital enter the mix.