The strategy of vacancy-filling from internal and external labor market sources: An empirical assessment of the recruitment strategy of different types

Abstract

The concept of the internal labor market concerns the way in which organizations try to recruit employees from the external market through so-called “ports of entry” and to allocate them to different jobs within the organization. The transaction cost reasoning deals with costs which arise from the choice between internal or external recruitment of employees. The subject of the theory of internal labor markets as well as the transaction cost approach is the interaction between organizations and their environments. This paper argues that in different types of organization one can find typical strategies of vacancy-filling. The strategy of vacancy-filling depends on interaction priorities which exist within the organizations and different influences from outside. There are different types of boundary setting. In one extreme case the priorities are distributed in such a way that the preference is for a high degree of vacancy-filling through external recruitment and low degree of internal recruitment; in the other case, the reverse occurs. The theoretical starting point of this paper is based on Mintzberg's typology of organizations which corresponds highly to the (hierarchy) governance structure developed by Williamson and the characteristics of internal labor markets. This paper concentrates on an empirical test of vacancy-filling within the different organizational configurations and the derivation of vacancy-filling patterns. The paper starts by introducing the concepts of boundary crossing which leads to an integrated theoretical framework. The empirical results are related to this framework.