Development of a conceptual framework on real options theory for strategic human resource management

The purpose of this paper is to propose a conceptual real options theory framework for the firms to use options to mitigate both investment risks and retention of the trained human resources.

This conceptual paper is built with logical argumentation.

The growth of IT firms has created a demand for quality IT industry employees in substantive quantity in India. IT firms provide training and development (T&D) inputs for developing better skills of employees for better employee and superior firm performance. T&D input requires firm investment. It also creates enhanced market demand for the trained employee. High growth area like IT firms not only competes for market but also for employees. A trained employee might leave the firm that provided the training to join a rival firm which offers relatively better salary, a catch -22 situation. This paper develops a real options-based framework for strategic human resource management (HRM).

This work integrates the theory of real options and strategic HRM.

This conceptual work is one of the first attempts to use real options theory on strategic HRM.