In 1999, American researchers, Lepak and Snell developed the foundation of a human resource

architecture that aligned different employment modes and employment relationships. The

four employment modes are (1) internal development (core), (2) acquisition, (3) contracting and (4)
alliance.

In here,

Transaction Cost Economics: Market transactions and internal production can be

viewed as alternatives; there are costs associated with managing employees through
market arrangements (i.e., transaction costs) versus within hierarchical arrangements
(i.e., bureaucratic costs); firms focus on securing the most efficient form of organizing
employment; firm-specific investments incur costs of monitoring and securing
compliance; firms strive to minimize ex ante and ex post costs associated with
managing employment.

Human Capital Theory: Emphasizes the labor costs relative to the return on
investment (i.e., future productivity) for developing employee skills and knowledge
(i.e., education and training); employees own their own human capital; firms seek to
protect themselves from the transfer of their human capital investments to other firms;
investments in the development of generic skills are incurred by workers, whereas
investments in firm-specific training are incurred by the firm.

Resource-Based View Of The Firm: Emphasizes the strategic relevance of

knowledge- based competencies in terms of their direct link to achieving and
sustaining a competitive advantage; core competencies should be developed internally
while others may be outsourced; core competencies are those that are valuable, rare,
inimitable, and nontransferable.
Thus very important to understand the Lepak and Snell of the HR Architecture for
valuing human capital.