Managing human capital for innovative activities in Indonesian herbal medicine firms

This paper attempts to explain human capital enhancement (HCE)practices in upgrading human skills, knowledge and ability,specifically (i) how firms’ internal upgrading mechanisms areimplemented and (ii) how firms enhance human capital throughinteractions with external parties. Through case studies ofIndonesian herbal medicine firms, this study reveals that HCE forinnovative activities in herbal medicine firms occurred throughinnovative learning – by using and interacting. Companies showlearning by using traditional herbal ingredients to redesigninnovative products; managing continuously internal learning byinteracting across functional teams to create new, innovativeproducts; and managing external learning by interacting withexternal parties in the search for new, innovative products. Theeffective use of internal and external sources of innovation iscoordinated by, respectively, top management direction inside thecompany without research and development (R&D); managers ofcross-functional teams within the company with in-house R&Dactivities; and top-level management meetings within thecompany with limited R&D activities.