Internal promotion or external recruitment: firm size and the choice of vacancy fulfillment in organizations

SHI Lei1 LI Lulu ZHAO Zhong2

(1.Center for Studies of Sociological Theory & Method, Renmin University of China)
(2.School of Labor and Human Resources, Renmin University of China)

【Abstract】This paper focuses on the formative mechanism of the paradox with regard to choices made by employers while filling job vacancies. It aims to explain how firms can overcome the constraint of firm-specific human capital and the employees’ bargaining power, thus converting employment relationship from closeness to openness. We found that the constraint of firm-specific human capital as well as the bargaining power structure between the employers and employees determined the type of labor market within an organization, thus affecting the choice between internal promotion and external recruitment. On the other hand, the constraint of firm-specific human capital and bargaining power structure between employers and employees varies nonlinearly as the firm size increases.

【Keywords】 bargaining power; specific human capital; size; internal promotion; external recruitment;

【DOI】

Download this article

    Footnote

    [1]. (1) Although the data are tracking survey data, the data between 2012 and 2013 are not tracking data, so the data used in this paper are still cross-sectional data. [^Back]

    [2]. (2) Thanks to anonymous experts for their suggestions on the selection of control variables. [^Back]

    [3]. (3) Gary Becker divided the corporate human capital into two types: firm-specific human capital and general human capital. He pointed out that employers’ investment in employee training was usually limited to the firm-specific human capital and would not pay for general human capital. [^Back]

    [4]. (4) Due to space limitations, if the control variables such as annual increase, and the industry have no special significance, the results of them are not reported, but are available upon request (E-mail: shilei2014@ruc.edu.cn). [^Back]

    References

    Lazear, E. Personnel Economics for Managers. Liu, X. (trans.) & Dong, K. (collate) Beijing: SDX Joint Publishing Company, (2000).

    Scott, R. Organizations and Organizing. Huang, Y., Li, X. Shen, W. et al. (trans.) Qiu, Z. (collate) Beijing: Huaxia Publishing House, (2002).

    Williamson, O. 经济工作者学习资料, (50) (1987).

    Yang, W. & Tang, H. Personnel Economics (人事管理经济学). Shanghai: Fudan University Press, (2012).

    Zhao, Y. Finance and Trade Research (财贸研究), (1) (2004).

    Baker, George, Michael Gibbs & Bengt Holmstrom 1994, “The Internal Economics of the Firm: Evidence from Personnel Data.” Quarterly Journal of Economics 109(4).

    Baron, James N. & William T. Bielby 1980, “Bring the Firms Back In: Stratification, Segmentation, and the Organization of Work.” American Sociological Review 45(5).

    Becker, Gary S. 1975, Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education. New York: Columbia University Press.

    Berg, Ivar & Arne L. Kalleberg 2001, Sourcebook of Labor Markets. New York: Kluwer Acad./Plenum.

    Bidwell, Matthew 2013, “What Happened to Long Term Employment? The Role of Worker Power and Environmental Turbulence in Explaining Declines in Worker Tenure.” Organization Science 24(4).

    Bidwell, Matthew & J. R. Keller 2014, “With or Without? How Firms Combine Internal and External Labor Markets to Fill Jobs.” Academy of Management Journal 57(4).

    Braverman, Harry 1974, Labor and Monopoly Capital. New York: Monthly Review Press.

    Cappelli, Peter 1999, The New Deal at Work: Managing the Market-Driven Workforce. Boston: Harvard Business School Press.

    Cappelli, Peter 2001, “Assessing the Decline of Internal Labor Markets.” In Ivar Berg & Arne. L. Kalleberg (eds.), Sourcebook of Labor Markets. New York: Kluwer Acad./Plenum.

    Chan, William 1996, “External Recruitment versus Internal Promotion.” Journal of Labor Economics 14(4).

    Chan, William 2006, “External Recruitment and Intrafirm Mobility.” Economic Inquiry 44(1).

    Dalton, Dan R. & Idalene F. Kesner 1983, “Inside or Outside Succession and Organizational Size: The Pragmatics of Executive Replacement.” The Academy of Management Journal 26(4).

    Davis-Blake, Alison & Brian Uzzi 1993, “Determinants of Employment Externalization: A Study of Temporary Workers and Independent Contractors.” Administrative Science Quarterly 38(2).

    Doeringer, Peter B. & Michael J. Piore 1971, Internal Labor Markets and Manpower Analysis. Lexington, MA: D.C. Heath and Company.

    Fantasia, Rick & Kim Voss 2004, Hard Work: Rethinking the American Labor Movement. Berkeley/Los Angeles: University of California Press.

    Fligstein, Neil & Roberto M. Fernandez 1988, “Worker Power, Firm Power, and the Structure of Labor Markets.” The Sociological Quarterly 29(1).

    Hollister, Matissa 2011, “Employment Stability in the U.S. Labor Market: Rhetoric versus Reality.” Annual Reviews of Sociology 37.

    Jacoby, Sanford M. 2005, The Embedded Corporation: Corporate Governance and Employment Relations in Japan and the United States. Princeton: Princeton University Press.

    Kalleberg, Arne L. & Mark E. Van Buren 1996, “Is Bigger Better? Explaining the Relationship between Organizational Size and Job Rewards.” American Sociological Review 61(1).

    Kosters, Marvin H. 1997, “New Employment Relationships and the Labor Market.” Journal of Labor Research 18(4).

    Kristal, Tali 2013, “The Capitalist Machine: Computerization, Workers’ Power, and the Decline in Labor’s Share within U.S. Industries.” American Sociological Review 78(3).

    Lauterbach, Beni, Joseph Vu & Jacob Weisberg 1999, “Internal vs. External Successions and Their Effect on Firm Performance.” Human Relations 52(12).

    Masters, John K. & Grant Miles 2002, “Predicting the Use of External Labor Arrangements: A Test of the Transaction Costs Perspective.” The Academy of Journal 45(2).

    Naveen, Lalitha 2006, “Organizational Complexity and Succession Planning.” Journal of Financial and Quantitative Analysis 41(3).

    Pfeffer, Jeffrey & Yinon Cohen 1984, “Determinants of Internal Labor Markets in Organizations.” Administrative Science Quarterly 29(4).

    Piore, Michael & Charles Sabel 1984, The Second Industrial Divide: Possibilities for Prosperity. New York: Basic Books.

    Podolny, Joel M. & James N. Baron 1997, “Resources and Relationships: Social Networks and Mobility in the Workplace.” American Sociological Review 62(5).

    Prendergast, Canice 1993, “The Role of Promotion in Inducing Specific Human Capital Acquisition.” The Quarterly Journal of Economics 108(2).

    Rasell, Edie & Eileen Appelbaum 1997, “Nonstandard Work Arrangements: A Challenge for Workers and Labor Unions.” Social Policy 28(2).

    Reinganum, Marc R. 1985, “The Effect of Executive Succession on Stockholder Wealth.” Administrative Science Quarterly 30(1).

    Royal, Carol & Robert Althauser 2003, “The Labor Markets of Knowledge Workers: Investment Bankers’ Careers in the Wake of Corporate Restructuring.” Work and Occupations 30(2).

    Sørensen, Aage B. & Arne L. Kalleberg 1981, “An Outline of a Theory of the Matching of Persons to Jobs.” In Ivar Berg (ed.), Sociological Perspectives on Labor Markets. New York: Academic Press.

    Stewman, Shelby 1986, “Demographic Models of Internal Labor Markets.” Administrative Science Quarterly 31.

    Uchitelle, Louis 2006, The Disposable American: Layoffs and Their Consequences. New York: Knopf.

    Uzzi, Brian & Zoe I. Barsness 1998, “Contingent Employment in British Establishments: Organizational Determinants of the Use of Fixed-Term Hires and Part-time Workers.” Social Forces 76(3).

    Villemez, Wayne J. & William P. Bridges 1988, “When Bigger Is Better: Differences in the Individual-Level Effect of Firm and Establishment Size.” American Sociological Review 53(2).

    Williamson, Oliver E., Michael L. Wachter & Jeffrey E. Harris 1975, “Understanding the Employment Relation: The Analysis of Idiosyncratic Exchange.” Bell Journal of Economics 6(1).

    Zhao, Wei & Xueguang Zhou 2004, “Chinese Organizations in Transition: Changing Promotion Patterns in the Reform Era.” Organization Science 15(2).

This Article

ISSN:1002-5936

CN: 11-1100/C

Vol 34, No. 03, Pages 25-47+242-243

May 2019

Downloads:0

Share
Article Outline

Abstract

  • 1 Introduction: research issues
  • 2 Literature review
  • 3 Organization size and firms’ choices for vacancy fulfillment
  • 4 Data, variables and models
  • 5 Result analyses
  • 6 Conclusion and discussion
  • Footnote

    References