The seminal work of Becker on investment in HC created a lot of interest in HC research, and many studies have been published on the topic since then. It has also expanded to the entrepreneurship discipline, where scholars argue that HC plays a significant role in the success of SMEs (Becker 1962; Gimeno et al. 1997). Schultz (1961), one of the early academic theorists of Human Capital Theory, viewed HC as a key factor influencing the economic growth of modern national economies (Abas, Pardiman & Supriyanto 2024; Kwon 2009). Schultz (1961) viewed HC as similar to property regarding the labour force in the classical sense, positing that the productive capacity of individuals dwarfs all other forms of wealth put together. Based on this view, most HC scholars have come to accept that HC can be defined as knowledge and skills embedded in an individual (Becker 1962; Kwon 2009). Currently, HC is considered the most significant knowledge-based asset, supporting the sustainability and growth of value-added expertise within organisations (Chiganze & Sağsan 2022). Abas et al. (2024), drawing on Becker’s (1994) concept of HC, assert that the skills, knowledge and competencies of employees serve as capital that can yield returns similar to other capital investments.

As a result, when individuals invest in their personal development, they enhance their productivity and the contributions made from an organisational perspective. As an intangible component of an organisation’s intellectual capital, HC is the most influential yet challenging factor to quantify. In today’s world, knowledge holds immense value, and HC – which represents this wealth of knowledge – is critical for maintaining and achieving a competitive advantage (Rahimi et al. 2024). These attributes inform individuals’ ability to pursue and fulfil personal, professional and organisational goals (Chiganze & Sağsan 2022). As stated by Adam Smith in his seminal work ‘The wealth of nations’, HC is vital as a source of progress and increased economic activity (Rahimi et al. 2024).

Human capital has also been associated with innovation and described as an indispensable resource within its value-creation process (Alegre et al. 2012). It is further suggested that expanding scientific and technical knowledge increases labour productivity and other inputs of production capital (Becker 1964, 1994). Human Capital Theory posits that countries with sustained growth have also seen significant increases in the education and training of their labour forces (Becker 1964, 1994).

According to the World Bank (2024), South Africa has experienced a notable decline in economic growth over the past 15 years. This trend is particularly evident in the SME sector, which has seen a year-on-year reduction of 1.3% in the total number of enterprises. The decline is attributed to a combination of factors, including subpar economic performance and prevailing challenging economic conditions (SEDA 2024). External shocks, such as the coronavirus disease 2019 (COVID-19) pandemic, geopolitical instabilities and broader economic impacts, along with slowing internal productivity rates and diminished investment activity, have collectively undermined the country’s competitiveness and overall economic performance.

Human capital comprises the insights, ideas, skills, knowledge, expertise, creativity and learning capabilities of employees, all of which are vital for organisational and economic growth. Skilled employees play a critical role in driving economic output and fostering sustainable development, as highlighted by Ngepah, Seba and Mabindisa (2021). Their research underscores the essential contributions of HC to a thriving economy. Ngepah et al. (2021) further investigate the intricate bidirectional relationship between HC and total output, demonstrating that enhancements in HC positively influence economic performance. Consequently, deficiencies in the ‘stock’ of HC can impede current productivity and jeopardise long-term economic prospects, as remarked by the World Bank (2024). In addition, Dhobha and Madondo (2024) emphasise a significant positive correlation between the quality of HC and employment generation. As such, SMEs are integral to the employment landscape of South Africa.

The Labour Force Survey conducted by Statistics South Africa in 2022 indicated that SMEs generated 9.31 million jobs during the second quarter of that year, representing 59% of total employment in the nation at that time. These findings underscore the imperative for strategic investments in education and skill development to cultivate economic resilience and promote sustainable growth. Such investments are essential not only for enhancing individual capabilities but also for ensuring the overall health and vibrancy of the economy. A significant number of research that has focused on the impact of HC on the performance of SMEs have predominantly examined the early stages of business development (Abas et al. 2024; Ngepah et al. 2021; Rens et al. 2021; Retail Capital 2024; SEDA 2022, 2024).

Human capital research delineates three distinct forms of HC: GHC, firm-specific HC (FHC) and task-specific HC (THC). Becker (1964), a leading authority in the field of HC, makes a significant distinction between two primary categories: GHC, which encompasses the general knowledge and skills acquired through education and work experience and possesses transferable characteristics. Conversely, SHC, which includes both firm-specific and task-specific components, is developed through education, training and experiences that are particular to specific tasks and industries. Becker (1964, 1993) asserts that SHC is not generally transferable to other positions, sectors or organisations. He further posits that HC is deemed specific when it enhances an individual’s productivity within a particular firm and its unique context (Abas et al. 2024; Kwon 2009). This study then investigates both but focusing on EHC on the SHC category. These are operationalised as education, training and experience for both GHC and EHC categories (Abas et al. 2024).

According to Lanza and Simone (2024), GHC is a crucial signalling mechanism for transferable skills, knowledge and experience. This expertise is invaluable to organisations and can be strategically utilised to drive superior results. Individuals and entrepreneurs with a strong foundation of general formal education (GFE) are often better equipped to navigate complex challenges. In a competitive landscape, GHC goes beyond simply acquiring transferable skills; it is essential for the success of any venture. Research indicates that GHC can significantly enhance a team’s competitive advantage, as each member brings distinct and innovative skills and perspectives that collectively boost performance (Lanza & Simone 2024).

According to Ogujiuba et al. (2025), skilled, educated and adaptive workforces help foster sustainable economic environments. Addressing complex problems is crucial for entrepreneurs to navigate challenges, foster growth and generate employment opportunities. The utilisation of GHC offers a distinct advantage in this endeavour. The use of strong HC skills enhances productivity, innovation and efficiency. It also helps drive competitiveness by enabling organisations to adopt better practices and technologies, as well as to respond more effectively to environmental and economic market changes (Ogujiuba et al. 2025). Research conducted by Ucbasaran, Westhead and Wright (2008) demonstrates that formal education has a positive impact on the identification and pursuit of opportunities. Likewise, entrepreneurs with a higher level of formal education tend to achieve greater earnings, which in turn facilitates access to funding for their enterprises (Baptista, Karaöz & Mendonça 2014).

Furthermore, GHC enhances an organisation’s absorptive capacity, allowing for the effective integration and application of new knowledge and competencies. While GHC holds substantial value because of its broad applicability, it is important to note that it may not always provide the specialised knowledge required for specific organisations, industries or sectors. This limitation can sometimes result in competency traps (Lanza & Simone 2024), potentially hindering an organisation’s ability to adapt to changes in the environment (Ganotakis 2012).

General HC empowers individuals to learn, adapt and innovate, while managerial HC offers practical expertise in leading and managing a business (Hirata, Suzuki & Takii 2019). According to Estrin, Mickiewics and Stephan (2016), an investment in HC development enables individuals to harness new and existing knowledge and adapt it to their environmental and business situations. Hirata et al. (2019), Khan et al. (2022) and Chiganze and Sağsan (2022) collectively demonstrate that the interaction between GHC and managerial HC has a positive impact on EHC. This study operationalised GHC into two categories: GFE and work experience.

Specific HC refers to HC that is particularly suited to a particular task or industry. In this study, SHC is operationalised as EHC, which combines entrepreneurship education (EE) and entrepreneurial work experience within the SME space.

This study followed a post-positivist paradigm and employed a quantitative, deductive approach to examine the influence of HC elements on job creation in South African SMEs. The post-positivist paradigm was adopted because it acknowledges the complexity of social reality while valuing objective and measurable facts (Maksimović & Evtimov 2023). Positivism also recognises that knowledge is tentative and context dependent to allow for a more nuanced understanding of phenomena such as HC and job creation (Maksimović & Evtimov 2023).

A quantitative deductive approach was employed to rigorously test hypotheses obtained from existing theories, allowing systematic examination and validation of relationships between the study’s variables (Barroga et al. 2023).

The cross-sectional design was necessary for this study because it provides an efficient way for the analysis of associations between the elements of HC and job creation at a single point. This is an appropriate method, especially when a study’s, such as the current study, goal is to observe correlations rather than causality (Setia 2016).

The study’s target population included SMEs located across all nine provinces of South Africa. This comprised diverse settings such as urban, semi-urban and rural areas. This extensive geographic coverage was intended to capture a representative sample of the different business environments within the country.

Simple random sampling, which was employed in this study, was appropriate to ensure that every SME with online access had an equal opportunity to participate in the study, thus minimising selection bias and improving the generalisability and fairness of the findings (Ahmed 2024). Eligible respondents were specifically owners or senior managers who possessed decision-making authority to ensure that the data collected reflected informed views on business operations and job creation. A total of 297 valid responses were received. There were seven responses with missing values for some of the variables. However, these responses were handled with care, technically making some variables have 290 responses. Thus, both the variables that received 297 responses and those that received 290 responses were used and were sufficient to achieve adequate statistical power for robust quantitative analysis.

Data were collected using a structured questionnaire administered via the Qualtrics platform. Measurement scales were adapted from Galawe (2017) PhD thesis and covered five dimensions relating to GHC, EHC and job creation constructs (see Table 1). Most items were rated on a 5-point Likert scale (1 = strongly disagree; 5 = strongly agree), and a few were categorical (i.e. education). The 5-point Likert scale is commonly used in social science research for its simplicity and effectiveness in capturing respondents’ attitudes and perceptions with sufficient variability while minimising respondent fatigue (Tanujaya, Prahmana & Mumu 2022). The instrument was used in a previous study, and therefore there was no need to pilot test it (Galawe 2017). Structured questionnaires are a preferred method when collecting quantitative data to ensure consistency and ease of statistical analysis (Creswell & Creswell 2017),which is the case of this study.

Data were analysed in Stata 16 (StataCorp, College Station, Texas, US). Descriptive statistics were first generated to profile the sample (entrepreneurs and businesses’ characteristics). Pearson correlation was used to examine associations and test for multicollinearity, and the results showed the data were good for further analysis. Hypotheses were tested using ordered logistic regression, as the dependent variable (job creation) was measured in ordered categories. Model assumptions, including proportional odds, were verified, and statistical significance was set at the 5% level.

Ethical approval to conduct this study was obtained from the University of the Witwatersrand Human Research Ethics Committee (No. H14/04/03) before data collection resumed. Participation was voluntary, with informed consent secured from all respondents. The questionnaire was coded in a way that ensured respondents do not continue with the rest of the survey if they did not consent to participate in the study. This function was voluntary on the survey instrument throughout data collection. Anonymity and confidentiality were maintained throughout, no personal details were collected and the data were stored securely for academic use only.

Both demographic data and business characteristics defined the profiles of the respondents and businesses surveyed. Among the 297 respondents, only 28% were in the youth category, aged between 18 years and 35 years. The sample consisted of 58% males and 42% females. Regarding race, 53%, 46% and 1% of the respondents identified as black, white and other, respectively. In examining the entrepreneurs’ educational backgrounds, most respondents held a diploma or certificate as their highest qualification. Specifically, 11% had completed matriculation, while 3% had qualifications lower than matriculation. In addition, 23% of the respondents were graduates, and 32% possessed a postgraduate qualification. In entrepreneurial education, 16% of respondents had no entrepreneurial qualification, 43% held a diploma or certificate, 10% were university graduates and 21% possessed a postgraduate qualification.

The business profile indicates that Gauteng province is the primary location for a significant proportion of businesses (46%), followed by Western Cape (26%) and KwaZulu-Natal (11%), with the remainder distributed among the six provinces. It is important to note that some businesses operate in multiple locations, and the total would not add up to 100%.

The correlation matrix in Table 2 indicates a relationship between the dependent variable (Job creation) and all the independent variables (HC elements). However, 9 out of 10 independent variables show a positive relationship, while experience unrelated to current work (EUW) exhibits a negative correlation with employee growth (JEG). The three HC elements with the strongest relationship to job creation are experience with some work applied (EWA) (r = 0.259), experience in similar work (ESW) (r = 0.245) and training in technical skills (TTS) (r = 0.212). All independent variables have a relationship with the dependent variable (JEG), so they were all considered for further analysis.

Four hypotheses were tested, examining GHC and EHC elements, each with education and work experience. The results and their interpretation are presented in Box 1, Box 2 and Box 3.

Table 3 summarises the findings that enabled the study to answer the primary research question, of which HC elements are likely to influence job creation the most in South African SMEs. Out of the 10 hypotheses tested, only 3 emerged as significant: 2 elements of GHC (EWA and ESW) and 1 element of entrepreneurial HC (TTS) though TTS was negative. These are highlighted in Table 3 for ease of reference.

This study then concludes the following based on the key findings:

Generally, the past experience has to be related or applied to the current business for it to have a significant influence on job creation.

Current business-related training in technical skills (TTS) does not improve the capacity of SMEs to create jobs, as it negatively influences employee growth significantly.

A key strength of this study lies in its integration of Human Capital Theory with empirical evidence drawn from a sizeable and diverse SME sample spanning all nine South African provinces. The analytical approach, using ordered logistic regression, enables a nuanced examination of how different education and experience variables relate to job creation, thereby providing a meaningful contribution to understanding human capital dynamics in the South African SME context. However, the study is not without limitations. The cross-sectional design restricts causal inference, and the reliance on self-reported data may introduce response bias. In addition, the study focuses on selected human capital elements, excluding other determinants of job creation such as contextual, structural or resource-based factors. These limitations should be borne in mind when interpreting the findings. Future research could adopt longitudinal designs and incorporate a broader set of variables to extend insight into the drivers of job creation within SMEs.