Moderating effect of innovation on human capital and small firm performance in construction industry: the Malaysia case

Abstract

This study evaluate the importance of human capital on the performance of small firms in the construction sector in developing countries. Primary data was obtained from 255 small contractors in the construction sector in the state of Kelantan, Malaysia. Analysis of the study was carried out through descriptive and multiple regression methods. The results show that 2 elements of human capital namely business experience and level of education have significant positive correlation with the performance of small firms in the construction sector, while training elements do not due to small-contractors’ low preference towards training programs. This study proves that human capital and innovation are important for the small firm performance in the construction industry. The findings are consistent with the Theory of Human Capital and Theory of Economic Development in the context of Western countries.

Keywords: human capital; innovation; small contractors; housing construction industry; small firm performance; entrepreneurship