Hypothesis 1 proposed a relationship between a professional firm’s human capital and competitive advantage. The results lent support to Hypothesis 1. That is, the coefficient for human capital (0.43) was significant and positive, suggesting strong support for Hypothesis 1. The result also supported Carmeli & Tishler’s (2004, p. 1,271) assertion that ‘human capital is considered a source of higher performance in some local government bodies.’
The results supported Hypothesis 2. The coefficient for this hypothesis was significant and positive (0.27), suggesting strong support for Hypothesis 2. That is, there is a positive relationship between a professional firm’s human capital and competitive advantage, as enhanced by its core skills. The result also supported Grant’s (1991, p. 118) assertion that ‘skills (capabilities) are the main sources of competitive advantage.’
Hypothesis 3 predicted that there was a positive relationship between a professional firm’s human capital with international capabilities (cross-border skills) and competitive advantage. The standardised path coefficient was statistically significant and positive (0.23). This finding suggested that the more a firm acquires cross-border skills, the greater the relationship would become between a firm’s human-capital and competitive advantage. The change of R2 suggested that competitive advantage can be better explained by both the firm’s human capital and its cross-border skills. Hypothesis 3 was therefore supported.
The results supported Hypothesis 4. The coefficient for this hypothesis was significant and positive (0.27), thus suggesting strong support for Hypothesis 4, that is, there is a positive relationship between a professional firm’s international capabilities (cross-border skills) and competitive advantage. The result also supported Quinn’s (1980, p. 40) assertion that ‘these capabilities enable professional firms to build rapid momentum for new strategic shifts.’
The results supported Hypothesis 5. The coefficient for this hypothesis was significant and positive (0.23), thus suggesting strong support for Hypothesis 5; that is, a professional firm with international capabilities (cross-border skills) is more likely to generate competitive advantage than its counterparts without international capabilities (cross-border skills). The result also supported the assertion by Hitt, Uhlenbruck and Shimizu (2006, p. 1,152) that ‘service firms that internationalize without strong human capital are likely to be at a competitive disadvantage’, thus bridging the gap between strategic human capital (skills) management and internationalisation of professional-service firms—an area that has not been widely researched in studies.
The results also supported Hypotheses 6, 7 and 8. The coefficient for Hypothesis 6 was significant and positive (0.31), thus suggesting strong support for Hypothesis 6 (i.e. the relationship between a professional firm’s human capital and competitive advantage will be moderated by perceived VRIO valuing, in such a way that the relationship will be positive when valuing is high). The coefficient for Hypothesis 7 was significant and positive (0.26), thus suggesting strong support for Hypothesis 7 (i.e. the relationship between a professional firm’s core skills and competitive advantage will be moderated by perceived VRIO valuing, in such a way that the relationship will be positive when valuing is high). The coefficient for Hypothesis 8 was significant and positive (0.26), thus suggesting strong support for Hypothesis 8 (i.e. the relationship between a professional firm’s cross-border skills and competitive advantage will be moderated by perceived VRIO valuing, in such a way that the relationship will be positive when valuing is high). As can be seen from Figure 26, there were significant moderating effects of VRIO on the relationships of human capital, core skills and cross-border skills with competitive advantage. Thus, Hypotheses 6, 7 and 8 were supported.
Discussion
VRIO
The present study examined the moderating effects of VRIO on capabilities (international skills), particularly cross-border skills, with competitive advantage. Using multivariate analysis, it has been demonstrated that VRIO acts as a significant intermediate variable between cross-border skills and competitive advantage. Linear regression analysis (see Table 26) shows the strong moderating effect of VRIO on the relationship of human capital, core skills and cross-border skills with competitive advantage to be R = 0.55, R = 0.49 and R = 0.50 respectively. From the result, it was shown that the R-square (changes) of human capital and competitive advantage almost doubled with the VRIO moderators from 0.18 to 0.31; the result for core skills and competitive advantage increased almost tripled from 0.07 to 0.24; and the result for cross-border skills and competitive advantage also rose 3.5 times from 0.07 to 0.25. However, without the moderating effects of VRIO, the relationship between resources and competitive advantage remained uneventful at 0.43 for human capital, 0.26 for core skills and 0.26 for cross-border skills. Therefore, this study has contributed to filling the gap in the literature on VRIO as a moderator between international skills and competitive advantage. These findings provide theoretical and empirical contributions to the literature of both internationalism and strategic management. The results of this study support all of the hypotheses based on RBV theories.
Cross-Border Skills
The quantitative results show that most of the 329 participants perceived there to be a higher level of core skills and cross-border skills among the professionals in Taiwan than in Hong Kong or China. In addition to using regression analysis to determine the significance of various hypotheses, graphs were used to determine how widely held these resources were among firms in the sample (Hair et al. 2006, p. 41). Hansen, Perry and Reese (2004, p. 1,283) knew of no study in which this type of additional analysis had been done. Of the three regions (Taiwan, Hong Kong and China), Taiwan had the highest perceived mean values of human capital, VRIO, core skills and cross-border skills (see Figures 16, 17 and 18), as well as the highest perceived mean value of competitive advantage (see Figure 19). This result supports Hypothesis 5 that a professional firm with international capabilities (cross-border skills) is more likely to generate competitive advantage than its counterparts without international capabilities (cross-border skills). This would suggest that firms with strong human capital are not effectively leveraging their human capital if they do not internationalise.
Competitive Advantage
The VRIO framework (see Table 25) shows how lawyers’ perceptions of their skills influenced their competitive advantage and economic performance. As indicated in the VRIO framework, Taiwan was found to have the highest economic position with a sustained competitive advantage; China a medium economic position with competitive parity; and Hong Kong a medium–low economic position with a competitive disadvantage. This result supports Hitt, Uhlenbruck and Shimizu’s assertion that ‘service firms that internationalize without strong human capital are likely to be at a competitive disadvantage’ (2006, p. 1,152).
Key Contributions
Overall, this thesis makes three specific contributions to the literature. First, the study quantitatively measured resources via the perceptions of lawyers and applied the results to the VRIO framework (Table 25). Previous studies have only theorised about VRIS (Newbert, 2007, p. 24), and Arend and Levesque (2010, p. 916) treat VRIO—the strategic asset—as a fourth resource. This study has broadened the literature review of VRIO by exploring the empirically relevant theory of the powerful moderating effects of VRIO on resources and competitive advantage (Hypotheses 6, 7 and 8). Specifically, the results of this study suggest that the moderating effects of VRIO can greatly affect the relationships of resources and competitive advantage. This study has responded to the assertion by Thompson, Warhurst and Callaghan (2001, p. 938) that knowledge of competitive advantage is mostly inferred and abstract and that practical knowledge (measurement) of it is lacking. This is where this study has extended the RBV research; by examining capabilities (skills), it has addressed the weakness in the knowledge of competitive advantage. Further to the work of Miller and Shamsie (1996, p. 534) who directly measured resources, this study measured the perceived values of resources (human capital) and capabilities (skills), using a five-point Likert scale, and thus contributes to filling the gap in the literature on the applicability of the RBV to international (cross-border) human capital of professional-service firms.
Second, this thesis contributes to the international-management literature by theoretically arguing and empirically demonstrating a direct link between a firm’s international capability (cross-border skills) and competitive advantage (Figure 2). Moreover, this study supports Hitt, Uhlenbruck and Shimizu’s (2006, p. 1,152) theory on international human capital by testing the hypothesis that firms ‘that internationalize without strong human capital are likely to be at a competitive disadvantage’. Consistent with their theory, this study found that professional law firms in Hong Kong, China and Taiwan employ associate partners mainly in the areas of international IP and international M&A and litigation, and according to the VRIO framework, those firms that internationalise without strong human capital (both core and cross-border skills) experience competitive parity (Table 25). Thus, this thesis links the capabilities of cross-border skills and competitive advantage to internationalism.
Third, this thesis augments the research of Kor and Leblebici (2005, p. 969) on partner and associate-partner leveraging and the relationship of associate partners and skills. By incorporating this linkage, this research broadens the study of firm-specific skills of general-service firms with the study of cross-border skills of professional-service firms (Malos & Campion 2000, p. 749). Thus, this thesis offers a more realistic view of human capital and expands the theory of competitive advantage to both the international-business and the strategic-management contexts.