Investment Strategy for the Development of Human Capital of the

Enterprise

VIKTORIA BORSHCH

Odesa National Medical University,

65000Valikhovsky lane, 2, Odesa,

UKRAINE

OLEH SHEREMET

National University of Food Technologies,

01033Volodymyrska str., 68, Kyiv,

UKRAINE

IRYNA MYKOLAICHUK

State University of Trade and Economics,

02000, Kyoto str., 19, Kyiv,

UKRAINE

BASHUK HANNA

«Kryvyi Rih Fahovy Medical College» of Dnipropetrovsk Regional Council,

50051 Medichna str., 14, Kryvyi Rih, Dnipropetrovsk region,

UKRAINE

PAVLENKO OLENA

Dnipro National University the name оf Oles Honchar,

49000Gagarina avenue, 72, Dnipro,

UKRAINE

MYKHAYLO DANILKO

Academician Yuriy Bugay International Scientific and Technical University,

02000 Mahnitogorsky Lane, 3, Kyiv,

UKRAINE

Abstract: - The development of human capital has become increasingly important for enterprises in the context

of global transformations, where the parameters of human capital development are influenced by various

factors in the external and internal environment. The purpose of this study is to substantiate the theoretical and

applied principles of forming an investment strategy for the development of the human capital of the enterprise.

The results of the study made it possible to establish that the development of human capital of the enterprise

takes place in the context of global transformations, as a result of which the parameters of human capital

development are influenced by factors of the external environment and internal environment. The most

significant of them is the number of investments in human resources, the involvement of innovations, and the

improvement of the professional qualities of personnel. Overall, the results of this study highlight the

importance of forming an investment strategy for the development of human capital of an enterprise that takes

into account external and internal factors, such as the number of investments in human resources, innovation,

and professional development. By investing in human capital, enterprises can improve their competitive

position, adapt to changes in the market, and achieve sustainable growth.

Key-Words: - investment, Human Development Index, human capital, investment, competitiveness, innovative

development

Received: February 26, 2023. Revised: June 23, 2023. Accepted: June 30, 2023. Published: July 7, 2023.

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DOI: 10.37394/23207.2023.20.134

Viktoria Borshch, Oleh Sheremet,

Iryna Mykolaichuk, Bashuk Hanna,

Pavlenko Olena, Mykhaylo Danilko

E-ISSN: 2224-2899

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1 Introduction

The structural restructuring of the economy and the

society, reinforced by the emergence of new

destabilizing factors in the development of the

external and internal environment and the military

resistance to the armed aggression of the Russian

Federation, have given rise to the aggravation of the

issue of effective functioning of enterprises,

institutions, and organizations, as a result of which

their competitiveness is constantly reduced and the

uncertainty of their future existence increases.

Ensuring the dynamic development of business

entities of various forms of ownership is one of the

priority directions for the formation of strategic

vectors to provide their development, stability of

operations, and the achievement of high profitability

indicators. In the conditions of globalization and the

strengthening of mega-regionalization, an effective

tool for achieving the desired results is the strategic

planning of the development of the enterprise's

human capital and the formation of an effective

internal company policy of its systematic and

continuous investment. Taking into account the

outlined trends, in current conditions, the issue of

investigating the investment strategy for the

development of the human capital of the enterprise is

actualized, which requires in-depth study.

The purpose of the research is to substantiate the

theoretical and applied principles for the formation

of an investment strategy for the development of the

human capital of the enterprise.

2 Literature Review

Ensuring competitiveness and the formation of

competitive advantages at the stage of the

enterprise’s functioning is one of the priority

directions of the business entity’s activity. It is the

human capital that plays a significant role in this

process, because, according to the viewpoint of [1],

it can create such competitive advantages that make

it possible to successfully implement strategic

development targets. Human capital combines the

totality of knowledge available to personnel, their

professional abilities, and managerial effectiveness.

It is worth noting that the ability to attract

innovations depends on the level of development of

the enterprise's human capital. It is obvious that

human capital within the functioning of a business

entity turns into a key factor in stimulating the

development of the company; consequently, it is

important to finance it in time and meet existing

requirements. The outlined theory has been proven

and substantiated in the studies of [1], where a close

interrelationship between the indicators of the

competitiveness of enterprises and the human

development index across the countries of the world

was established.

[2], adhere to a similar position; they have

established that human capital is valuable, and it is

an important component of the implementation of

innovative strategies, as well as a driving force for

improving the effectiveness of the business entity.

Along with this, scientists argue that the human

capital management system should be consistent with

the goals and structure of the development strategy

of the enterprise itself, and also provide for the

possibility of forming investment strategies.

[3], suggests considering two categories of human

capital: (1) general and (2) specific. Moreover, the

scientist associates general human capital with the

availability of basic education and initial practical

experience of employees and identifies specific

human capital with knowledge, skills, and abilities to

carry out activities in a specific field. It becomes

obvious that it is the presence of specific human

capital in the company that gives grounds for testing

innovations and moving to the principles of

innovative and sustainable development of the

enterprise.

At the same time, [4], are convinced that the

development of human capital is important not only

for the implementation of innovations but also for the

introduction of strategic projects of the enterprise,

which require certain additional resources that can be

obtained through investment. The opinion of

scientists is shared by [5], who connects the theory of

human capital development with constant investment

in human resources and believes that the introduction

of innovations is more efficient and effective when

the organization has powerful modern human capital.

Along with this, [6], considers human capital to

be the key to the competitiveness of the company

and its stable development. Complementing

Pelinescy, the scientific discussion in the given

direction, [7], has concluded that the sustainable

development of human capital contributes to the

economic growth not only of the enterprise but also

of the entire country. Therefore, the scientist

proposes to carry out further investigations by

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Iryna Mykolaichuk, Bashuk Hanna,

Pavlenko Olena, Mykhaylo Danilko

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comparing indicators of human capital development

and innovation and investment development at the

level of the whole country with indicators of foreign

countries, which will allow identifying common

features and problematic aspects, one of which,

according to her viewpoint, is the interdependence of

low volumes of investment in human capital and the

slowdown in economic growth.

At the same time, as noted by [8], the issue of the

long-term impact of human capital on current

innovations and the stable development of the

company requires in-depth study, forasmuch as it has

been established that the factor of regionalization has

a significant impact on it, which involves the uneven

development of regions, its significant disparities and

the possibility of ensuring various conditions for

economic activity.

Particular attention should be paid to the

scientific developments of [9], who argues that

ensuring high competitiveness indicators for highly

developed countries depends significantly on

investment in the development of human capital.

Developing this idea, [10], proves that enterprises

invest in human capital to improve their performance

results. However, scientists are convinced that in the

modern scientific discourse, investigations in the

direction of studying the issues of the investment

strategy for the development of human capital are

quite limited, which requires additional exploratory

work.

In this context, the observations of [11], are

justified; the scholars have proven the need for

strategic management of human capital development,

which consists of the perception of human capital as

one of the elements of the company's assets,

forasmuch as it is a sustainable competitive

advantage and a factor in the efficiency and

effectiveness of the enterprise's activities. However,

[12], argues that it is impossible to ensure the

sustainable development of human capital without

investing in human capital; consequently, each

company should develop its investment strategy for

the development of human capital. From among the

most significant and often implemented investments

in the development of human capital, [13], single out

such as the systematic training of employees,

advancing their level of education, and improving

knowledge and skills that influence the enterprise's

effectiveness. Under such conditions, mechanisms

for promoting investment in human capital

development, which, according to the viewpoint of

[14], should be divided into public and private ones,

become of particular importance.

Taking into account the existing scientific

approaches to the issues of human capital

development of the enterprise, it is worth

highlighting the urgent necessity for the formation of

an investment strategy to ensure its implementation.

3 Research Method

The methodological base of the research was formed

using both special and scientific methods of

economic analysis and other fundamental

investigations, namely: the methods of analysis,

synthesis and scientific abstraction were used to

identify the essence of the scientific category

“human capital”, its development features and

significance; the methods of system analysis,

comparison and analogy were used to carry out

applied studies of existing trends in the development

of human capital and its impact on indicators of

competitiveness and innovative activity of economic

entities; by applying the method of comparative

analysis, the study of the features of investing in the

development of human capital was carried out;

methods of generalization and systematization were

applied to form conclusions based on the results of

the research of the issues outlined; cluster analysis

based on the k-means method was used to group the

countries of the European Union according to

indicators of the Human Development Index, the

Global Competitiveness Index, and the Global

Innovation Index; graphical and tabular methods

made it possible to visually display the applied

results of the conducted research.

The countries of the European Union were chosen

for the research.

The information base of the research is based on

the reporting data of leading international

organizations for 2018-2021, namely: Human

Development Report according to the human

development index indicator; the Global

Competitiveness Index according to the global

competitiveness index indicator, the Global Talent

Competitiveness Index according to the talent

competitiveness index and the Global Innovation

Report according to the global innovation index.

4 Result

The growing role of human capital in the modern

world is driven by its value and significant

development potential, not only in the current period

but also in the long shot. It becomes obvious that the

stable development of the human potential of

business entities is a priority task and the driving

force of intellectual and technological progress,

which depends on the level of competitiveness of the

enterprise and its ability to attract innovations.

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Iryna Mykolaichuk, Bashuk Hanna,

Pavlenko Olena, Mykhaylo Danilko

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It should be stated that the existing development

tendencies of the world countries do not have

stability and uniformity; after all, they position

different opportunities for the population to get

access to education, acquire professional skills, and

implement existing opportunities. As a result, the

outlined features cause a discrepancy between human

potential and the needs of the economy, and

economic entities are not able to provide high levels

of competitiveness.

In analyzing the effectiveness of using human

potential in modern conditions, it is necessary to take

into account the influence of the innovation factor

and the level of attracting investment resources to

stimulate its development. Some indicators have

been developed at the international level, which

allows for determining the state of human capital

development across countries of the world and

conducting comparative correlation in various

analyzed groups. One of these important indicators is

the Global Competitiveness Index, which makes it

possible to assess the state of functioning of

enterprises in the country and the efficiency of using

human capital. The dynamics of the Global

Competitiveness Index in the countries of the

European Union for the period 2018–202,1 [15],

[16], [17], [18], is reflected in Figure 1.

According to the results of the research

conducted, the highest indicators of the Global

Competitiveness Index are observed in such

countries as Finland (GCI: 79–82), the Netherlands

(GCI: 72–82), and Denmark (GCI: 72–81); however,

the lowest ones are recorded in Greece (GCI: 45–63),

Cyprus (GCI: 46–66), Malta (GCI: 47–69), Hungary

(GCI: 46–65) and Croatia (GCI: 46–62), which

unequivocally proves the uneven level of

development of human capital and the efficiency of

its user. At the same time, it is worth noting that

significant differences exist in the countries of the

European Union regarding the investment of human

capital, which is manifested in the amount of funding

for the development of human resources in

enterprises. As a result, this significantly affects the

formation of knowledge, skills, and motivation of

employees. It is obvious that in those countries

where the amount of investment in the development

of human capital is lower and there are no strategies

for its implementation, there is a problem of leaving

competitive, highly educated, and capable employees

outside the country and carrying out activities on the

territory of foreign countries, as a rule, highly

developed ones. This thesis is confirmed by the

indicators of the Talent Competitiveness Index; it is

expedient to demonstrate the dynamics of the

European Union's states in 2020–2021 in Figure 2.

Fig. 1: The state and tendencies of changes in the Global Competitiveness Index in the countries of the

European Union in 2018–2021

Compiled based on: [15], [16], [17], [18]

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Fig. 2: The state and tendencies of changes in the Talent Competitiveness Index in the countries of the

European Union in 2020–2021

Compiled based on [19], [20]

The results of applied studies make it possible to

state that according to the Talent Competitiveness

Index, the leading positions are held by such

countries as Denmark (TCI: 75–78), Luxembourg

(TCI: 72–77), the Netherlands (TCI: 74–77), Finland

(TCI: 73 –77) and Sweden (TCI: 74–78), and

outsiders are Croatia (TCI: 47–50), Romania (TCI:

44–50), Bulgaria (TCI: 46–52) and Greece (TCI: 49–

53), respectively. Accordingly, it is possible to state

the substantiation of the proposed hypothesis,

forasmuch as it has been established that highly

developed countries provide higher indicators of

talent competitiveness, which indicates a higher

efficiency of human capital management.

After all, the investigation of human capital in

the system of economic development of a certain

country allows analyzing the state of development of

human capital according to such criteria as the

standard of living of the population, its education,

literacy, and life expectancy. As a result of the

analysis, it has been established that in terms of the

level of human capital development, the highest

indicators are positioned in the following countries,

namely: Ireland (HDI: 0,94–0,95), Germany (HDI:

0,94), Denmark (HDI: 0,93–0,95 ), the Netherlands

(HDI: 0,93–0,94), Austria (HDI: 0,91–0,92), Finland

(HDI: 0,92–0,94), Belgium (HDI: 0,92–0,94),

Luxembourg (HDI: 0,90–0,93), Slovenia (HDI:

0,90–0,92) and Sweden (HDI: 0,93–0,95). At the

same time, the lowest values of the analyzed

indicator have been revealed in Bulgaria (HDI: 0,80–

0,82) and Romania (HDI: 0,81–0,82), respectively.

When studying the development of human

capital in the countries of the European Union, it is

expedient to pay attention to the indicators of the

implementation of innovative activities by economic

entities. After all, the innovative type of human

capital development indicates the attraction of

investment resources for its improvement and

effective use.

At the international level, it is customary to use

the Global Innovation Index for such assessments,

which makes it possible to provide insight into the

level of balancing of the real needs of the economy

and the capabilities of human capital to involve

innovations in practical activities. The conducted

studies of the dynamics of the Global Innovation

Index in the countries of the European Union in

2018–2021 (Figure 4) give grounds to assert that the

most innovative enterprises are located in the

territory of such countries as Sweden (GII: 62–64),

the Netherlands (GII: 59–63) and Finland (GII: 57–

60). On the other hand, the lowest indicators in the

analyzed group of countries have been recorded in

Romania (GII: 36–38), Greece (GII: 36–39), and

Croatia (GII: 37–41). The state and tendencies of

changes in the Human Development Index in the

countries of the European Union in 2018–2021 are

shown in Figure 3.

Aus

tria

Bel

giu

Bul

gari

Gre

ece

Den

mar

Esto

nia

Irel

and

Spai

Ital

Cyp

rus

Lat

via

Lith

uani

Lux

emb

our

Mal

Net

herl

and

Ger

man

Pola

Port

ugal

man

Slo

vaki

Slo

veni

Hun

gary

Finl

and

Fra

nce

Cro

atia

The

Cze

Rep

ubli

Swe

den

2020 72 72 52 53 78 67 73 62 59 62 61 60 77 66 77 74 56 63 50 57 63 54 77 69 50 65 78

2021 68 68 46 49 75 62 68 58 54 56 56 55 72 61 74 68 50 59 44 51 58 51 73 65 47 61 74

Talent Competitiveness Index

Countries

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Fig. 3: The state and tendencies of changes in the Human Development Index in the countries of the

European Union in 2018–2021

Compiled based on [15], [16], [17], [18]

Taking into account the outlined tendencies in

studying the development of human capital in the

countries of the European Union, we consider it

expedient to deepen our calculations and carry out

the grouping of the specified countries according to

the indicators selected for evaluation. Such

calculations will be carried out using the technology

of cluster analysis by applying the k-means method,

and the obtained results will be systematized in Table

As a result of the clustering of the European

Union’s states according to the indicators of the

Global Competitiveness Index, the Human

Development Index, and the Global Innovation

Index, it was possible to single out three groups of

countries characterized by common features of the

parameters of human capital development, namely:

highly developed countries, countries with the

medium level of development, and developing

countries.

The first group for all indicators has included

such countries as Austria, Belgium, Denmark,

Ireland, Luxembourg, the Netherlands, Germany,

Finland, France, and Sweden, where the highest

values of the analyzed indicators have been recorded,

and the development of human capital takes place

based on efficiency, innovation, and pioneering

work. This allows organizations to constantly ensure

the relevant level and permanently increase the

indicators of competitiveness.

These countries also have highly developed labor

markets that enable workers to fully utilize their

skills and contribute to the country's economic

growth.

Overall, the success of these countries in human

capital development has contributed significantly to

their economic growth and competitiveness. The

highly skilled and educated workforce enables these

countries to innovate, adapt to new challenges and

opportunities, and maintain a high level of

productivity.

The second group consists of Spain, Italy,

Latvia, Lithuania, Portugal, Slovenia, the Czech

Republic, Estonia, Cyprus, and Malta, which position

medium, and in some cases, high indicators of

human capital development. However, these states

have certain problems regarding the effectiveness of

its use, in particular, in terms of intensification of the

processes of outflow of highly qualified employees

outside the country. The lack of job opportunities,

low salaries, and limited career growth prospects

often drive highly skilled workers to seek

employment opportunities in other countries with

more favorable conditions. This brain drain results in

a loss of valuable human capital and a reduced

capacity for innovation and economic growth.

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Fig. 4. The state and tendencies of changes in the Global Innovation Index in the countries of the European

Union in 2018–2021

Compiled based on [21], [22], [23], [24].

To address this challenge, these countries need

to create an enabling environment that encourages

highly skilled workers to stay and contribute to the

country's economic development. This includes

providing competitive salaries, creating job

opportunities, improving working conditions, and

offering career growth prospects.

The third group includes Bulgaria, Greece,

Romania, Slovakia, Hungary, and Croatia, which

belong to countries of the transitive type and have

significant problems with the development of

human capital and insufficient resources for

investing in it. Therefore, characterizing the

countries of the European Union according to the

parameters of human capital development, it is

possible to note the following pattern: in highly

developed countries, more attention is paid to the

problems of human capital development and the

amount of investment is significantly higher than in

developing countries.

The pattern observed in the development of

human capital in the European Union indicates that

highly developed countries pay more attention to

the problems of human capital development and

invest more resources in it than developing

countries.

However, it is essential to recognize that

investing in human capital development is not only

a responsibility of highly developed countries but

also a requirement for the development of all

countries, regardless of their level of economic

development.

In conclusion, the development of human

capital is critical for the success of organizations

and the economic development of countries. The

European Union has different levels of human

capital development, with highly developed

countries investing significantly more resources in

it than developing countries. However, it is

important to recognize that investing in human

capital development is essential for all countries to

remain competitive in the global market and ensure

sustainable economic growth.

Bel

giu

Bul

gari

The

Cze

Rep

ubli

Den

mar

Ger

man

Est

onia

Irel

and

Gre

ece

Spa

Fra

nce

Cro

atia

Ital

Cyp

rus

Lat

via

Lith

uani

Lux

emb

our

Hun

gar

Mal

The

Net

herl

and

Aus

tria

Pol

and

Port

ugal

man

Slo

veni

Slo

vaki

Finl

and

Swe

den

2018 51 43 49 58 58 51 57 39 49 54 41 46 48 43 41 55 45 50 63 51 42 46 38 47 43 60 63

2019 50 40 49 58 58 50 56 39 48 54 38 46 48 43 41 53 45 49 61 51 41 45 37 45 42 60 64

2020 49 40 48 58 57 48 53 37 46 54 37 46 46 41 39 51 42 46 59 50 40 44 36 43 40 57 62

2021 49 42 49 57 57 50 51 36 45 55 37 46 47 40 40 49 43 47 59 51 40 44 36 44 40 58 63

Global Innovation Index

Countries

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Table 1. Grouping of the countries of the European Union according to the indicators of the Global

Competitiveness Index, the Human Development Index, and the Global Innovation Index

Indicator

Number of the cluster

ІІ

ІІІ

Global

Competitiveness

Index

Austria

Spain

Bulgaria

Belgium

Italy

Greece

Denmark

Latvia

Cyprus

Estonia

Lithuania

Malta

Ireland

Portugal

Poland

Luxembourg

Slovenia

Romania

The Netherlands

The Czech Republic

Slovakia

Germany

Hungary

Finland

Croatia

France

Sweden

Human

Development

Index

Austria

Greece

Bulgaria

Belgium

Estonia

Latvia

Denmark

Spain

Portugal

Ireland

Italy

Romania

Luxembourg

Cyprus

Slovakia

The Netherlands

Lithuania

Hungary

Germany

Malta

Croatia

Slovenia

Poland

Finland

France

Sweden

The Czech Republic

Global

Innovation

Index

Denmark

Belgium

Bulgaria

Germany

The Czech Republic

Greece

Ireland

Estonia

Croatia

France

Spain

Latvia

The Netherlands

Italy

Lithuania

Finland

Cyprus

Hungary

Sweden

Luxembourg

Poland

Malta

Romania

Austria

Slovakia

Portugal

Slovenia

Compiled based on: [15], [16], [17], [18], [19], [20], [21], [22], [23], [24].

5 Discussion

Investment in human capital is essential for the

long-term success of an enterprise. Developing an

effective investment strategy for human capital is

critical to achieving a competitive advantage,

attracting and retaining talented employees, and

fostering a culture of continuous learning and

growth.

The strengthening of the destructive impact of

global challenges and dangers has led to a decrease

in the level of competitiveness of business entities in

many countries of the world. Particularly noticeable

negative phenomena and processes regarding the

development of human capital are observed in the

countries belonging to the European Union;

however, they have not completed the

transformational restructuring yet. Comparative

studies of the main tendencies in the development of

human capital make it possible to identify certain

patterns that are related to the level of social-

economic development of the country. In particular,

countries with high indicators of investment in

human capital can implement the highest standards

of innovative development and combine the

introduction of innovations with the progressive

development of human capital. Along with this,

developing countries put the main emphasis on

preserving the existing level of development of

human capital, as a result of which they do not focus

on improving the quality and efficiency of its use.

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Human capital is positioned as a multi-level set

of interdependent components, each of which

requires investments, in particular: educational,

professional, social, and cultural ones. Therefore, its

development significantly affects society and the

economy, and also determines the main trends of

innovative development not only of business entities

but also of the entire country.

An effective investment strategy for the

development of human capital is critical to the

success of any enterprise. By prioritizing the

development of critical skills and competencies,

leveraging a variety of training and development

methods, and incorporating performance

management and career development, the enterprise

can create a culture of continuous learning and

growth and achieve a competitive advantage in the

marketplace. In this context, we consider it quite

reasonable to propose a further improvement of

human capital development tools, one of which is

the establishment of a public-private partnership in

this direction, which, at the current stage, is the

perspective of further scientific investigation.

6 Conclusions

Therefore, the results of studying the main

tendencies and problematic issues regarding the

formation of an investment strategy for the

development of the enterprise's human capital give

grounds for asserting that there is no single

approach to the formation of such an investment

strategy at the level of the European Union. The

conducted assessments of the main parameters of

this economic category have made it possible to

establish its significant dependence on the level of

financing in the form of long-term investments, the

level of innovative development of the national

economy and business entities, and on favorable

conditions for conducting business activities. A

significant problem of the loss of human capital has

been revealed in those countries that are classified

as a transitive type of development and have not

completed structural restructuring yet (Bulgaria,

Greece, Romania, Slovakia, Hungary, and Croatia),

in which the values of all analyzed indicators are

within crisis limits, and the movement of highly

qualified employees takes place in those countries

that are highly developed (Austria, Belgium,

Denmark, Ireland, Luxembourg, the Netherlands,

Germany, Finland, France, and Sweden). As a result

of the clustering of the European Union's states

according to the indicators of the Global

Competitiveness Index, the Human Development

Index, and the Global Innovation Index, the

hypothesis that highly developed countries can

ensure a higher level of development of the

enterprise's human capital while developing

countries need advisory assistance, has been proven.

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Viktoria Borshch, Oleh Sheremet,

Iryna Mykolaichuk, Bashuk Hanna,

Pavlenko Olena, Mykhaylo Danilko

E-ISSN: 2224-2899

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Contribution of Individual Authors to the

Creation of a Scientific Article (Ghostwriting

Policy)

The authors equally contributed in the present

research, at all stages from the formulation of the

problem to the final findings and solution

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Scientific Article or Scientific Article Itself

No funding was received for conducting this study.

Conflict of Interest

The authors have no conflict of interest to declare

that is relevant to the content of this article.

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WSEAS TRANSACTIONS on BUSINESS and ECONOMICS

DOI: 10.37394/23207.2023.20.134

Viktoria Borshch, Oleh Sheremet,

Iryna Mykolaichuk, Bashuk Hanna,

Pavlenko Olena, Mykhaylo Danilko

E-ISSN: 2224-2899

1526

Volume 20, 2023