firm-specific human capital

Firm-specific human capital refers to the skills and knowledge that are valuable only within a particular company. This contrasts with general human capital, which is transferable across employers. While formal education typically develops general human capital, on-the-job training often cultivates both general and firm-specific skills.1

Employers are often hesitant to invest in general skills because employees can take that training to other companies. Conversely, employees may be reluctant to invest in firm-specific skills without significant job security or compensation. These dynamics are central to understanding employment relationships and the incentives for both employers and employees regarding skill development.1