Revisiting human capital theory: progress and prospects

This chapter provides a chronology of understanding of human capital theory tracing its roots back to the pioneering work of Adam Smith. The chapter traces the theoretical underpinnings of human capital theory and its evolution in the human resources literature. The chapter then goes on to criticize the misconception in understanding and measurement of human capital as overly simplistic whereby understanding of human capital theory amounts to more than simply counting training initiatives. Generational differences in understanding human capital theory are then discussed in respect of changing attitudes to work and skills development. The chapter concludes by developing a new approach to assessing human capital within organizations based on the Ability, Motivation, Opportunity framework.