Human Capital Efficiency and Firm-Level Labour Productivity: Panel Evidence from Publicly Listed Firms in East Africa
Main Article Content
Keywords
Human Capital Efficiency, Labour Productivity, Intellectual Capital, MVAIC, Total Factor Productivity, East Africa, Listed Firms
Abstract
Human capital is widely theorized as the foundation of firm-level productivity, yet evidence on how efficiently East African firms convert human capital investment into labour productivity remains scarce. This study examines the effect of human capital efficiency on labour productivity among publicly listed firms in Kenya, Uganda, Tanzania, and Rwanda, drawing on an 11-year panel of audited financial statements (2013–2023). Human capital efficiency was measured using the Modified Value-Added Intellectual Coefficient Model (MVAIC™), while labour productivity was derived from a value-added Cobb–Douglas production function within a Total Factor Productivity approach. Fixed-effects estimation, validated by a Hausman specification test, shows that human capital efficiency is positively and significantly associated with labour productivity (β = 0.028, p < .001), the largest coefficient among the intellectual capital components examined. The result is consistent with Human Capital Theory and the knowledge-based view of the firm in an emerging-market setting, suggesting that workforce capabilities operate as a comparatively immediate lever of productivity where innovation ecosystems remain nascent. The findings support continued investment in training, skills development, and knowledge management, and contribute firm-level evidence to a thin intellectual capital literature on Africa. The paper's design limits, discussed in limitation section, mean the results are best read as a within-firm association rather than a fully identified causal effect.
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References
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Bontis, N. (1998). Intellectual capital: An exploratory study that develops measures and models. Management Decision, 36(2), 63–76. https://doi.org/10.1108/00251749810204142
Bontis, N., & Fitz-enz, J. (2002). Intellectual capital ROI: A causal map of human capital antecedents and consequents. Journal of Intellectual Capital, 3(3), 223–247. https://doi.org/10.1108/14691930210435554
Chinanu, E., & Akintoye, I. R. (2024). Intellectual capital and financial performance of listed nonfinancial firms in Sub-Saharan Africa. Academia.edu. https://www.academia.edu/124604561/INTELLECTUAL_CAPITAL_AND_FINANCIAL_PERFORMANCE_OF_LISTED_NONFINANCIAL_FIRMS_IN_SUBSAHARAN_AFRI
CA
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Corrado, C., Hulten, C., & Sichel, D. (2009). Intangible capital and U.S. economic growth. Review of Income and Wealth, 55(3), 661–685. https://doi.org/10.1111/j.1475-4991.2009.00343.x
Crass, D., & Peters, B. (2014). Intangible assets and firm-level productivity (ZEW Discussion Paper No. 14-120). Centre for European Economic Research. https://ftp.zew.de/pub/zew-docs/dp/dp14120.pdf
Creswell, J. W., & Creswell, J. D. (2018). Research design: Qualitative, quantitative, and mixed methods approaches (5th ed.). Sage.
Dettori, B., Marrocu, E., & Paci, R. (2012). Total factor productivity, intangible assets and spatial dependence in the European regions. Regional Studies, 46(10), 1401–1416. https://doi.org/10.1177/0034340411406417
Dube, T., & Ndlovu, S. (2021). Governance quality and the returns to human capital in Southern African firms. African Journal of Business Management, 15(8), 210–223.
Duho, K. C. T. (2022). Intangibles, intellectual capital, and the performance of listed non-financial services firms in West Africa: A cross-country analysis. Merits, 2(3), 101–125. https://doi.org/10.1108/MERJ-07-2022-0089
Gatuyu, C. M. (2019). Role of intangible assets on growth of firm value in Kenya [Doctoral dissertation, Kenya Methodist University].
Grant, R. M. (1996). Toward a knowledge-based theory of the firm. Strategic Management Journal, 17(S2), 109–122. https://doi.org/10.1002/smj.4250171110
Gul, S., Khan, M., & Ajmair, M. (2022). Role of human capital in labour productivity: Evidence from Pakistan. Journal of Economic Impact, 4(1), 75–84.
Gyimah-Brempong, K., & Wilson, M. (2004). Health human capital and economic growth in sub-Saharan African and OECD countries. The Quarterly Review of Economics and Finance, 44(2), 296–320. https://doi.org/10.1016/S1062-9769(03)00019-5
Gyimah-Brempong, K., Paddison, O., & Mitiku, W. (2006). Higher education and economic growth in Africa. The Journal of Development Studies, 42(3), 509–529. https://doi.org/10.1080/00220380500405615
Hausman, J. A. (1978). Specification tests in econometrics. Econometrica, 46(6), 1251–1271. https://
doi.org/10.2307/1913827
Heckman, J. J., & Mosso, S. (2014). The economics of human development and social mobility. Annual Review of Economics, 6(1), 689–733. https://doi.org/10.1146/annurev-economics-080213-041015
Heshmati, A., & Rashidghalam, M. (2016). Labour productivity in Kenyan manufacturing and service industries (IZA Discussion Paper No. 9923). Institute for the Study of Labor. https://ideas.repec.org/p/iza/izadps/dp9923.html
ILOSTAT. (2023). Statistics on the informal economy. International Labour Organization. https://ilostat.ilo.org/topics/informality/
Islam, R., Kinyondo, A., & Nganga, J. (2015). Real wages and labour productivity in Tanzania: How do they link? Journal of African Studies and Development, 7(3), 81–98.
Ismael, R. (2009). The impact of human capital attainment on output and labor productivity of Malay firms. Journal of International Business Research, 8(1), 45–58.
Jardon, C. M., & Martinez-Cobas, X. (2021). Measuring intellectual capital with financial data. PLOS ONE, 16(5), e0249989. https://doi.org/10.1371/journal.pone.0249989
Kariuki, D. W. (2024). Intellectual capital efficiency and stability of commercial banks in Kenya. African Journal of Economic Review, 12(1), 55–74.
Kasibi, S., Prihatini, E., & Yadnya, I. P. G. B. (2023). ESG and intellectual capital efficiency: Evidence from ASEAN emerging markets. Journal of Accounting and Investment, 19(2). https://scholarhub.ui.ac.id/jaki/vol19/iss2/2/
Kasoga, P. S. (2020). Does investing in intellectual capital improve financial performance? Panel evidence from firms listed in Tanzania. Cogent Economics & Finance, 8(1), 1802815. https://doi.org/10.1080/23322039.2020.1802815
Keter, J., Onsongo, C., & Onsongo, E. (2024). Financial performance, intellectual capital disclosure and firm value: The winning edge. Cogent Business & Management, 11(1), 2302468. https://doi.org/10.1080/23311975.2024.2302468
Kim, Y., & Lee, J. (2019). Intellectual capital performance of the textile industry in emerging markets: A comparison with China and South Korea. Sustainability, 11(8), 2354. https://doi.org/10.3390/su11082354
Kingori, G. (2025). Human capital disclosure and firm value; Does audit committee size matters. Evidence from listed firms in Nairobi Securities Exchange, Kenya. Journal of Finance and Accounting, 9(1), 40-58. https://stratfordjournalpublishers.org/journals/index.php/journal-of-accounting/article/view/2447
Kuchina, Y., & Maistro, S. (2022). Labour productivity as an indicator of enterprise efficiency. Economics and Business Review, 8(2), 33–47.
Kwon, D.-B. (2009, October). Human capital and its measurement [Paper presentation]. The 3rd OECD World Forum on Statistics, Knowledge and Policy, Busan, Korea.
Lucas, R. E. (1978). On the size distribution of business firms. The Bell Journal of Economics, 9(2), 508–523. https://doi.org/10.2307/3003596
Lucas, R. E. (1988). On the mechanics of economic development. Journal of Monetary Economics, 22(1), 3–42. https://doi.org/10.1016/0304-3932(88)90168-7
Lukalo, D., & Kiminyei, F. (2018). Empirical estimation of productivity and its determinants in Kenya (KIPPRA Discussion Paper No. 212). Kenya Institute for Public Policy Research and Analysis. https://kippra.or.ke/wp-content/uploads/2021/02/empirical-estimation-of-productivity-and-its-determinants-in-kenya-dp212.pdf
Melitz, M. J. (2003). The impact of trade on intra-industry reallocations and aggregate industry productivity. Econometrica, 71(6), 1695–1725. https://doi.org/10.1111/1468-0262.00467
Mincer, J. (1974). Schooling, experience, and earnings. National Bureau of Economic Research.
Muthoti, G. K., Namusonge, G. S., & Sakwa, M. (2024). Relationship between human capital disclosure and firm value of firms listed at the NSE, Kenya. American International Journal of Business Management, 7(8). https://
www.aijbm.com/Wp-Content/Uploads/2024/08/B781621.pdf
Myers, S. C. (1977). Determinants of corporate borrowing. Journal of Financial Economics, 5(2), 147–175. https://doi.org/10.1016/0304-405X(77)90015-0
Nadeem, M., Gan, C., & Nguyen, C. (2017). Does intellectual capital efficiency improve firm performance in BRICS economies? A dynamic panel estimation. Measuring Business Excellence, 21(1), 65–85.
Nimtrakoon, S. (2015). The relationship between intellectual capital, firms’ market value and financial performance: Empirical evidence from the ASEAN. Journal of Intellectual Capital, 16(3), 587–618. https://doi.org/10.1108/
JIC-09-2014-0104
Nucci, F., Pozzolo, A. F., & Schivardi, F. (2005). Is firm productivity related to its financial structure? Evidence from microeconomic data. Rivista di Politica Economica, 95(1), 269–290.
Nyambo, N., & Nyamsogoro, G. (2024). The Impact of Intellectual Capital on Financial Performance of Insurance Firms in Tanzania. MUST Journal Of Research And Development, 5(3), 10-10.
Odat, M. A., & Bsoul, R. (2022). The impact of intellectual capital on firms’ performance: Evidence from Jordan. Corporate Governance and Organizational Behavior Review, 6(2), 100–109. https://doi.org/10.18488/11.v11i4.3232
Odhon’g, E. A., & Omolo, J. (2015). Effect of human capital investment on organizational performance of pharmaceutical companies in Kenya. Global Journal of Human Resource Management, 3(6), 1-29.
Ogundari, K., & Awokuse, T. (2018). Human capital contribution to economic growth in sub-Saharan Africa: Does health status matter more than education? Economic Analysis and Policy, 58, 131–140. https://doi.org/10.1016/j.eap.2018.02.001
Okafor, F. O., & Adeyemi, A. A. (2025). Intellectual capital and financial stability of listed manufacturing firms in Nigeria. International Journal of Economics and Business Management, 11(12), 176–196. https://iiardjournals.org/get/IJEBM/VOL.%2011%20NO.%2012%202025/INTELLECTUAL%20CAPITAL%20AND%20FINANCIAL%20176-196.pdf
Omete, F. I. (2016). Intellectual capital efficiency and financial performance of commercial banks in Kenya. European Journal of Business and Management, 8(29), 76–87.
Owusu, P., & Oppong, S. (2022). Training, professional development and labour productivity in West African service firms. African Journal of Economic and Management Studies, 13(3), 402–419.
Oyinlola, M. A., & Adedeji, A. (2019). Human capital, financial sector development and inclusive growth in sub-Saharan Africa. Economic Change and Restructuring, 52(1), 43–66. https://link.springer.com/article/10.1007/s10644-017-9217-2
Oyinlola, M. A., & Adedeji, A. A. (2020). Enhancing economic growth impact of financial development and human capital through capital flows in sub-Saharan Africa. Journal of Economic Development, 45(2), 95–114.
Pulic, A. (1998, January). Measuring the performance of intellectual potential in the knowledge economy [Paper presentation]. The 2nd McMaster World Congress on Measuring and Managing Intellectual Capital, Hamilton, Canada. https://www.bib.irb.hr/35384
Pulic, A. (2000). VAIC™—an accounting tool for IC management. International Journal of Technology Management, 20(5–8), 702–714. https://doi.org/10.1504/IJTM.2000.002891
Raheem, I. D., Isah, K. O., & Adedeji, A. A. (2018). Inclusive growth, human capital development and natural resource rent in SSA. Economic Change and Restructuring, 51(1), 29–48. https://doi.org/10.1007/s10644-016-9193-y
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Aug 3, 2026
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Mugambi , J. M., Onyango , J., & Kongo, Y. O. (2026). Human Capital Efficiency and Firm-Level Labour Productivity: Panel Evidence from Publicly Listed Firms in East Africa. Journal of Frontiers in Humanities and Social Sciences, 4(2), 257–272. https://doi.org/10.69897/jofhscs.v4i2.385
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Author Biographies
James Mwenda Mugambi , Department of Economics, School of Business and Economics, Moi University, P.O. Box 3900-30100, Eldoret, Kenya
Department of Economics, School of Business and Economics, Moi University, P.O. Box 3900-30100, Eldoret, Kenya
James Onyango , Department of Economics, School of Business and Economics, Open University of Kenya
Department of Economics, School of Business and Economics, Open University of Kenya
Yabesh O. Kongo, Department of Economics, School of Business and Economics, Kisii University, Kenya
Department of Economics, School of Business and Economics, Kisii University, Kenya