An efficiency-based relational approach to human capital governance

This chapter examines stakeholder relationship management and governance in an increasingly interconnected and turbulent business environment. More specifically, it focuses on “employees” or human capital resources (HCR) as a key and salient stakeholder group in modern organizations. Human capital is increasingly recognized as a critical resource in creating and sustaining organizational competitive advantage particularly in the knowledge-based intangible economy. Building on both instrumental and normative (ethical) views of stakeholder theory, this chapter uses a transaction cost economics (TCE) approach to examine relational stakeholder management in the context of human capital development. It provides a contingency framework to help further understanding of the dynamic between relational (informal) and legal (formal) HCR relations. This chapter contributes to the understanding of balancing relational and economic components in dynamic employment relationships and contracts.