Breaking the capability trap: Human capital mediation in public sector resource utilisation

Abstract

Public sector organisations in developing economies persistently experience gaps between strategic resource allocation and operational performance outcomes. This is a paradox that conventional accounting and management control frameworks have struggled to explain. In the Defence Sector of Zambia (DSZ), this disconnect is particularly acute: despite formal adoption of the Balanced Scorecard (BSC) through the Public Sector Reform Programme, the DSZ continues to experience 18% budget underspending, 22% procurement irregularities, and 25% project delays. This study examines why strategic resource allocations fail to achieve operational efficiency in public sector Performance Management Systems (PMS), focusing on human capital bottlenecks in the DSZ. It pursues three objectives: to examine the relationship between strategic resource guidance, resource allocation, and resource utilisation efficiency; to empirically validate the mediating role of human capital development; and to formally model and estimate the parameters of a capability trap. A sequential explanatory mixed-methods design was employed, combining quantitative survey data (n=135 senior DSZ officers, 82% response rate) with 21 in-depth key informant interviews, framed by dynamic capabilities theory, the resource-based view, and institutional theory. Spearman's rank correlation and thematic analysis were applied to quantitative and qualitative data respectively, with integration achieved through joint displays. The Human capital deficits create a capability trap in which low implementation capacity undermines resource utilisation (M=3.24, SD=1.03). The trap is formally modelled as Hₜ₊₁ = Hₜ + α(Rₜ − δHₜ) − βIₜ, with empirically estimated parameters (α=0.18, δ=0.15, β=0.12) confirming the DSZ operates in a borderline trap condition (0.18 < 0.27). Human capital development shows a significantly stronger correlation with resource utilisation efficiency (ρ=0.524) than direct resource allocation (ρ=0.312), empirically confirming its mediating role. The findings demonstrate that human capital is the critical mechanism linking strategic resource allocation to operational performance and that resource underutilisation in the DSZ is primarily a capability, rather than a resource, problem. The study concludes that strengthening implementation capacity is essential for improving public sector performance. It recommends institutionalising protected training budgets (3–5% of personnel costs), capability dashboards to monitor deployment efficiency, and accountability frameworks that measure implementation capacity alongside financial compliance. These recommendations have broader relevance for performance management reforms in defence, healthcare, education, and local government in developing economies.