The Human Capital-Innovation Nexus in Large Manufacturing Firms: A Dual Mediation Analysis of Relational and Structural Capital

Abstract

This study fills a significant gap in the literature on emerging economies by examining the dual mediating  roles of relational and structural capital in the human capital-innovation nexus within Ethiopia's large manufacturing firms. Based on the Resource-Based View and Social Capital Theory, the study analyzes survey data from 264 firms using Covariance-Based Structural Equation Modeling (CB-SEM). The results show that while human capital has a significant direct impact on innovation (β = 0.16, p = 0.024), relational capital (indirect effect = 0.05, p< 0.001) and structural capital (indirect effect = 0.06, p < 0.001) significantly increase the impact of human capital. The stronger mediator, structural capital (β = 0.27, p = 0.003), emphasizes the role of institutionalized knowledge systems and technology infrastructure in converting skilled workforces into innovation outcomes. Although relationship capital is essential for external cooperation, its impact is relatively small (β = 0.15, p = 0.016), which is indicative of Ethiopia's disjointed industrial ecosystems and undeveloped stakeholder networks. By illustrating the conditional efficacy of human capital in resource-constrained environments, where relational and structural mechanisms serve as complementary enablers, this study moves the focus of RBV from isolated resources to dynamic capability configurations by putting forth the concept of configurational capital, which is the context-dependent synergy of HC, SC, and RC. Practical ramifications highlight integrated approaches: in order to lower the costs of collaboration, policymakers should prioritize investments in digital infrastructure (such as ERP systems and R&D databases) while encouraging industry clusters. To maintain innovation, managers must coordinate staff training with external collaborations and knowledge-sharing procedures.