CHAPTER ONE

1. INTRODUCTION

1.1   BACKGROUND OF STUDY

Investment may be defined as a commitment of funds made in the expectations of some positive rate of return, expectation of returns is an essential element of an investment. Investment is an activity that is engaged in by people who have savings i.e investments are made from savings, or in other words people invest their savings but all savings are not investment.

The term human capital can trace its roots to the early 1960s, when Schultz (1961) proposed that HC consisted of the ‘knowledge, skills and abilities of the people employed in an organisation’. While concise, Shultz’s initial definition of HC is somewhat limited in that it does not take into consideration the concept of ‘value’ and the importance of ‘investment’ in HC. In 1981, Schultz revamped this definition and defined HC as: ‘…all human abilities to be either innate or acquired. Attributes which are valuable and can be augmented by appropriate investment will be human capital’ (Schultz 1981). More than a decade later, Becker (1993) defined HC as the ‘knowledge, information, ideas, skills, and health of individuals’. Becker’s definition, like Schultz’s original classification, is somewhat limited.

However, Becker’s definition is interesting as it adds an extra dimension in terms of the ‘health of individuals’. Indeed, the health and well-being of individuals is an important factor in contemporary research which relates to the contextual development of HC within organisations. Bontis et al (1999) defines HC as ‘the human factor in the organisation; the combined intelligence, skills and expertise that gives the organisation its distinctive character. The human elements of the organisation are those that are capable of learning, changing, innovating and providing the creative thrust which if properly motivated can ensure the long-term survival of the organisation’. Bontis et al (1999) highlight the importance of innovation, change and creativity and its role in HC.

Moreover, the definition emphasizes the role of motivation in leveraging these capacities. The definition acknowledges the importance of ‘distinctive character’. Finally, it alludes to the outcome of business sustainability, referring to the ‘long-term survival of the organisation’. Becker (1993) conceived of human capital as referring to “investment in education, training, skills, health, and other values that can not be separated from the individual.” Human capital is a trait crystallized in an individual that can not be expunged. To Okojie (1995) human capital refers to the “abilities and skills of the human resources of a country.” In the words of Marimuthu el tal (2009) human capital simply refer to the “processes that relate to training, education and other professional initiatives in order to increase the levels of knowledge, skills, abilities, values, and social assets of an employee which will lead to the employee’s job satisfaction and performance.”

Schultz (1981) makes a notation on human capital when he said: “Take into account the innate and acquired skills. Those are important and may invest to expand, and will form the human capital.” The most famous of the proponents of the human capital theory well known today, is Gary Stanley Becker of the Chicago School of Economics, USA. In his classical book written in 1964 titled: “Economic Development with Unlimited Supply of Labour”, Becker stressed the importance of investment in education, training, skills, health and other values in human beings.

1.2   STATEMENT OF THE PROBLEM

Human capital involves increase investment in education and training of the individuals. Individual’s abilities can be enhanced through education and training that bring about effective change in the performance of jobs. Human capital amounts to investment on education and training which can be undertaken by individual or group of individual workers of any institution or organization. Considering the things mentioned above, lack of funding in the educational sector can be seen as a deficiency to human capital, this is a situation where the government shows little or no concern about the educational sector and putting more interest about politics and politics alone leaving the students to wander helplessly in the school without anything to learn with. Another problem could be lack of establishment of skill acquisition center for the development of entrepreneurial skill that can be of benefit to the individual and the economy at large. Finally, several research has been carried out on human capital but not even a single research has been carried out on investment on human capital in a dynamic contest model.

1.3   AIMS AND OBJECTIVES OF STUDY

The main aim of the study is to examine investment on human capital in a dynamic contest model. Other specific objectives of the study include:

1. to determine the correlation between investment, human capital and dynamic contest model.
2. to determine the factors affecting investment and human capital in a dynamic contest model.
3. to determine the extent to which investment and human capital affect dynamic contest model.
4. to determine the influence of investment and human capital on dynamic contest model.

1.4   RESEARCH QUESTIONS               

1. What is the correlation between investment, human capital and dynamic contest model?
2. What is the factors affecting investment and human capital in a dynamic contest model?
3. What is the extent to which investment and human capital affect dynamic contest model?
4. What is the influence of investment and human capital on dynamic contest model?

1.5   STATEMENT OF RESEARCH HYPOTHESIS

H0:    There is no relationship between investment on human capital and dynamic contest model.

H1:     There is a relationship between investment on human capital and dynamic contest model.

1.6   SIGNIFICANCE OF STUDY

The study on investment on human capital in dynamic contest model will be of immense benefit to economy as a whole in the sense that it will Enable the government to give in more resources in education for the betterment of the upcoming future leaders of tomorrow. Furthermore, the economist and mathematicians will be able to compare and contrast the negative investment of human capital and positive investment of human capital which will build a strong dynamic contest model that will in other hand serve as an x-ray to the growth of the economy. This is because in the early years most human capital were subject to slavery, robbery etc. which was of course the negative side of human capital, but if education and entrepreneurial skills is being invested into them it will be a plus to the economy in the sense that everyone will be self reliant or dependent such that they can fend for themselves. Finally, the study will contribute to the body of existing literature and knowledge in this field of study and provide the basis for further research.  

1.7   SCOPE OF STUDY

The study on investment on human capital is limited to dynamic contest model.

1.8   LIMITATION OF STUDY

Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

1.9   DEFINITION OF TERMS

Investment     In general, to invest is to allocate money in the expectation of some benefit in the future

Human Capital       Refers to the stock of knowledge, habits, social and personality attributes, including creativity, embodied in the ability to perform labor so as to produce economic value.

Dynamic Characterized by constant change, activity, or progress.