THE EFFECT OF HUMAN CAPITAL MANAGEMENT PRACTICE ON FIRM PERFORMANCE: THE MODERATION ROLE OF ORGANIZATIONAL IDENTIFICATION

Abstract

The purpose of this study was to examine the effect of human capital management practices on firm performance and analyzing the moderation role of organizational identification. The quantitative research approach was adopted using 234 valid questionnaires that were filled by employees who are working at the main office and selected branches of Ethio-telecom Addis Ababa, Ethiopia. To do so, stratified and simple random probability sampling techniques were used. To confirm the factor structure of the observed variables, CFA was applied and SEM was used to test the hypothesized relationship using SPSS v.25, and AMOS v.23 software. The results of structural equation modeling revealed that HCM practices specifically learning capacity, leadership practices, workforce optimization, and knowledge accessibility, positively affect firm performance, while organizational identification positively moderates this relationship. This implies, applying proper human capital management practices positively affects firm performance. The better the insight of employees' organizational identification the more the relationship amongst the study variables. The implications and suggestions for future research have also been discussed.