From potential value to recognised value: situational value theory

Purpose To develop Situational Value Theory (SVT), a conceptual explanation of how the value potential of human capability becomes organisationally realised under particular situational conditions. The paper addresses the limited understanding of why equivalent capabilities generate markedly different organisational value despite no substantive change in their underlying knowledge, skills, or behaviours. Design/methodology/approach This paper adopts a conceptual theory-building approach. It synthesises literature on human capability, organisational value, and valuation to develop SVT. The theory distinguishes between value potential, the latent capacity of human capability to contribute to organisational outcomes, and organisationally realised value, which emerges through the interaction of capability, situational conditions, and recognition. Findings SVT proposes that organisational value is not a stable property of individuals or competencies but is realised through the alignment of capability with situational conditions and the recognition of contribution by organisational actors. The theory explains why human capabilities generate different organisational value across contexts without assuming changes in the capabilities themselves. Originality/value SVT reconceptualises the relationship between human capability and organisational value by explaining not how human capability creates organisational value, but how the value potential of human capability becomes organisationally realised. In doing so, the theory provides a new conceptual foundation for understanding organisational evaluation, capability utilisation, and the situational realisation of human value potential.