AN ANALYSIS OF EMPLOYEE INVESTMENT IN SPECIFIC HUMAN CAPITAL BASED ON GAME THEORY

In this paper, employees are considered to be able to invest into certain forms of their own human capital, one of those being specific to their organization (‘firm specific’), and the other specific to their current managers (‘manager specific’). At the other hand, enterprises (organizations) have different preferences in terms of the two types of human capital investment because of their different functions, as well as regarding different organization forms and information structures. As relationships between the enterprise and the employees are becoming more cooperative, the presented model of employee investment in human capital includes the variables of enterprise preference, the investment cost and the proportion of the investment output which the enterprise distributes to the employees. By using the mechanisms of the cooperative game, this paper studies the problems of the output proportion which the enterprise distributes to the employees and the optimal investment ratio of the employees’ investments into the forms of human capital specific to the firm and managerial environment. It is argued that the risk attitude and the bargaining power are key factors to the payoff of both the firm and employees