The Theory of Real Options As Theoretical Foundation for the Assessment of Human Capital in Organizations**

Zusammenfassung

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The human capital represented by corporate employees involved in the information and knowledge economy is becoming an increasingly central value-creating factor in global competition. However, in contrast to other value-creating factors, human capital is more difficult to measure, evaluate and manage. Due to human capital's great importance for economic value creation, a series of studies on human capital evaluation have been published during the last few years. This paper discusses why so many traditional evaluation methods are only partly appropriate for categorizing, analyzing and evaluating human capital's special characteristics. In particular, it is difficult for many traditional approaches to integrate notions of flexibility and options with regard to the human capital of companies. Our result shows that the real options theory provides a theoretical framework for the evaluation of human capital and allows a differentiated analysis that, on a qualitative basis, enables investments in uncertainties that are associated with human capital. This theory thus forms the foundation for the quantification of human capital's inherent opportunities and risks. Consequently, this paper provides approaches for the future evaluation of human capital and a conceptual context for empirical studies.

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The Theory of Real Options As Theoretical Foundation for the Assessment of Human Capital in Organizations**

1. Introduction and problem formulation

In global competition, the information and knowledge economy's prerequisites increasingly focus employees' performance on economic efficiency considerations (see Lengnick-Hall/Lengnick 2002). The realization that people with their knowledge, experience, education, personality and behavior constitute the only resource that generates and retains organizational value led to the human capital concept (see Arthur 1994; Barney/Wright 1998; Becker/Gerhart 1996; Dyer/Reeves 1995; Ichniowski/ Shaw/Prennushi 1997; Lepak/Snell 1999). In an economic sense, human capital is "the propensity of a person or group to perform behaviors that are valued by an organization" (Smart 1998, 158).

Human Resource Management has to make sure that investments in people improve the competitiveness of organizations. Therefore, the tools and practices have to prove their contribution to a successful transformation of strategic goals into organizational success (Welpe/Rachbauer 2006). Based on research of Human Resource Accounting (Flamholtz/Lacey 1981) indicators have been developed to demonstrate the economic value added by human resources (Friedman/Hatch/Walker 1998). Combined with the idea of Humanistic Psychology employees are now seen as the source of innovation (Pfeffer 1998; Davenport 1999; Fitz-enz 2000; Sveiby 1998; Edvinsson/Brüning 2000). Research has attempted to develop possibilities for the evaluation of human capital from a qualitative (e.g., Fitz-enz 2000; Sveiby 1998; Edvinsson/Brüning 2000) as well as from a quantitative perspective (Scholz/Stein/Bechtel 2006). Despite the progress that has been made (for a review see Scholz/Stein/Bechtel 2006, 54-210; Barthel/Gierig/Kuhn 2004) there is still not only a lack in theoretical and empirical knowledge about the way human capital does contribute to organizational success (Persch 2003; Becker/Huselid/Ulrich 2001), but also a common agreement is missing on how to translate human capital into economically relevant terms. The available qualitative approaches provide indications for the evaluation, assessment and control of various corporate human capital aspects. They are, however, unsuitable with regard to the representation of human capital as a value-creating factor like other production factors such as, for example, money capital, as they do not permit quantification (Persch 2003; R...

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