The moderating role of human capital management practices on employee capabilities

Purpose – The purpose of this paper is to suggest and empirically test a model that explains employee capabilities from the knowledge‐based perspective. In this model, human capital management practices are employed as a moderator variable. Design/methodology/approach – A valid research instrument was utilized to conduct a survey of 14,769 current employees of a major North American financial services institution. The model was tested by using the partial least squares (PLS) structural equation modeling technique. A thorough analysis of the role of moderator was carried out. Findings – Findings provide support for the proposed model and show that employee capabilities depend on his or her training and development as well as job satisfaction levels. Job satisfaction in turn is affected by training and development, pay satisfaction, supervisor satisfaction, and job insecurity. These relationships are moderated by employee perceptions of human capital management practices. The model exhibits the highest predictive power when the employee perceptions of human capital management practices are also high. Research limitations/implications – With respect to a moderator analysis, no interaction effects of human capital management policies and other constructs were discovered, and the moderator was referred to as a homologizer that modifies the strength of the relationships among constructs through an error term. It was discovered that PLS and moderated multiple regression (MMR) produced very similar structural relationships when a moderator was employed. Practical implications – The findings may be utilized by knowledge management, organizational behavior, and human resources practitioners interested in the development of strong employee capabilities. Originality/value – This paper represents one of the first documented attempts to utilize human capital management practices as a moderator in organizational models.