Internal versus external search: A research note on transaction cost theory and human resource practices

Abstract

This research note uses Williamson's transaction cost theory to understand why organizations use certain search strategies to fill particular positions. The empirical analysis focuses on a large multistate banking institution's attempts to fill approximately 575 openings (ranging across roughly 130 job titles) originating between November 1987 and February 1988. In support of the transaction cost approach, reliance upon internal searches are promoted by asset specificity or task idiosyncrasies. However, the blending of internal and external search strategies best characterizes the recruitment process. Internal searches are augmented with specific external recruitment based on the conditions confronting the firm.