Dynamic Capabilities, Training, and Firm Performance

Dynamic capabilities theory underscores the critical role of organizational adaptation and learning in achieving sustained competitive advantage. In the rapidly evolving business landscape, characterized by technological advancements, global competition, and unforeseen disruptions like the Covid-19 pandemic, the importance of dynamic capabilities in ensuring organizational resilience and success is paramount. Labor market frictions create opportunities for firms to establish a sustainable competitive advantage through investments in training and human capital. This paper delves into the relationship between training provided to top and middle managers and its subsequent impact on firm performance, shedding light on the strategic importance of training initiatives in fostering organizational adaptability and success. The study utilizes a comprehensive dataset covering all sectors of the Italian economy from 2013 to 2021. Leveraging panel data techniques and self-selection models, the research demonstrates the exogenous impact of off-the-job formal training on total factor productivity, firm profitability, and growth. The findings highlight the varying effectiveness of managers’ training in different sectors, with a notable impact observed in the manufacturing industry. The literature review establishes the theoretical framework, emphasizing the positive impact of human capital investments on learning performance and, subsequently, on firm results. The paper formulates hypotheses, positing that training positively affects firm performance, influences firm growth, and has a greater impact on manufacturing firms. Econometric results reveal insights into the factors influencing firms’ probability of initiating training. The study employs IV-GMM techniques to control for the endogeneity of the training variable. The research establishes a significant and positive impact of managerial training on productivity and long-term growth, with a pronounced effect observed in firms active in the manufacturing sector. However, the impact on financial performance indicators is not statistically significant, possibly influenced by external factors such as market conditions, industry dynamics, and the Covid-19 pandemic. The disruptive influence of the Covid-19 pandemic is evident, diminishing the contribution of training across all firms.