1. 2.5: Talent Management and Competitive Advantage
It is generally accepted amongst management researchers that a sustainable
competitive advantage comes from the internal qualities that are hard to
imitate rather than, for example, the firms’ product-market position. Human
capital is such a resource. The resource and knowledge based views
recognize the firms’ knowledge resources as its tool for achieving a
sustainable competitive advantage (Ordóñez de Pablos, 2004). Heinen and
O’Neill (2004) argue that Talent Management can be the best way to create a
long-term sustainable competitive advantage. A sustainable competitive
advantage stems from valuable, company-specific resources that cannot be
imitated or substituted by competitors.
For how long it can be sustained depends on isolating mechanisms such as
social complexity and firm specificity (Hatch & Dyer, 2004). An example of an
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isolating mechanism is when a knowledge based competitive advantage is
embedded in the firm and not tied to specific individuals.
Research concerned with intellectual capital analyses knowledge stocks of
organizations. Knowledge stocks can exist at different levels of an
organization; individual, group and firm level. It is knowledge stocks at the
individual level that are labelled human capital and it includes knowledge,
capabilities, skills, experience and commitment of the individuals in the
organization. At the group level, knowledge stocks are called relational capital
and concerns the knowledge embedded with the relations between the
organization and all its stakeholders. Therefore, it can be further divided into
internal relational capital and external relational capital. Internal relational
capital concerns the value that comes from the strategic relationships with
employees and external relation capital from relationships with vital external
stakeholders like customers, suppliers, shareholders among others. Structural
capital is another word for firm level knowledge stocks. It is knowledge that
from individual and group levels has been embedded in the structures of the
organization and manifests itself like culture, routines, procedures and policies
(Ordóñez de Pablos, 2004).
According to Nonaka and Toyama (2005), knowledge is created and
transferred to the different levels of the organization through a process that
includes socialization, externalization, combination, and internalization.
Socialization is the first step when tacit knowledge is gathered and shared
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before it is made explicit in the externalization process. In the combination
process, internal or external explicit knowledge is selected, combined and
processed to create systemized, complex sets of knowledge. The new
established knowledge converts into new tacit knowledge in the
internalization stage and the process repeats itself in a spiral of knowledge
creation (Nonaka and Takeuchi, 1995, in Nonaka & Toyama, 2005). Human
capital, relational capital and structural capital can all be sources of long term
competitive advantage but the most significant evidence favours human
capital (Ordóñez de Pablos, 2004).
Hatch and Dyer (2004) argue that when human resources freely can United

2. Kingdom UK organizations, the assumption can be made that competitive
advantages that rely on human capital easily can disappear with the
employees leaving. However, if human capital is newly acquired from another
firm it needs to be adjusted and integrated into the new environment and
only a part of its knowledge is instantly recognized. For individual knowledge
to become a part of the firms’ competitive advantage it needs to be
transferred and finally embedded in the entire organization (Ordóñez de
Pablos, 2004). The time to tailor the human capital to its new environment
and to find its best use is a cost and the result is not always that the
knowledge can be wholly released in the new setting (Hatch & Dyer, 2004). A
study of investment banks concluded that high performers rarely sustained
their level of performance in a new organization (Deloitte, 2007b). This
means that although human capital is the source of a competitive advantage
it needs its system that it was originated from to be optimally valuable and
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inimitable (Hatch & Dyer, 2004). This connects with Talent Management that
needs to be firm specific to be most successful. It has to be customized to the
organization’s business and human capital context (Heinen & O’Neill, 2004).