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Internal hiring or external recruitment?

Author

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  • Jed DeVaro

    (California State University East Bay, USA)

Abstract

When an employer fills a vacancy with one of its own workers (through promotion or horizontal transfer), it forgoes the opportunity to fill the position with a new hire from outside the firm. Although firms use both internal and external hiring methods, they frequently favor insiders. Internal and external hires differ in observable characteristics (such as skill levels), as do the employers making the hiring decisions. Understanding those differences helps employers design and manage hiring policies that are appropriate for their organizations.

Suggested Citation

  • Jed DeVaro, 2020. "Internal hiring or external recruitment?," IZA World of Labor, Institute of Labor Economics (IZA), pages 237-237, May.
    • Handle: RePEc:iza:izawol:journl:2020:n:237
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    References listed on IDEAS

    as
    1. Antti Kauhanen & Sami Napari, 2012. "Career and Wage Dynamics: Evidence from Linked Employer-Employee Data," Research in Labor Economics, in: Research in Labor Economics, pages 35-76, Emerald Group Publishing Limited.
    2. Jed DeVaro & Antti Kauhanen & Nelli Valmari, 2019. "Internal and External Hiring," ILR Review, Cornell University, ILR School, vol. 72(4), pages 981-1008, August.
    3. Jed DeVaro & Hodaka Morita, 2013. "Internal Promotion and External Recruitment: A Theoretical and Empirical Analysis," Journal of Labor Economics, University of Chicago Press, vol. 31(2), pages 227-269.
    4. Chan, William, 1996. "External Recruitment versus Internal Promotion," Journal of Labor Economics, University of Chicago Press, vol. 14(4), pages 555-570, October.
    5. Alberto Bayo-Moriones & Pedro Ortín-à ngel, 2006. "Internal Promotion versus External Recruitment in Industrial Plants in Spain," ILR Review, Cornell University, ILR School, vol. 59(3), pages 451-470, April.
    6. Alberto Bayo-Moriones & Pedro Ortín-Ángel, 2003. "Internal Promotion Versus External Recruitment: Evidence in Industrial Plants," Working Papers 0303, Departament Empresa, Universitat Autònoma de Barcelona, revised Mar 2003.
    7. Anders Frederiksen & Takao Kato, 2018. "Human Capital and Career Success: Evidence from Linked Employer‐Employee Data," Economic Journal, Royal Economic Society, vol. 128(613), pages 1952-1982, August.
    8. William Chan, 2006. "External Recruitment and Intrafirm Mobility," Economic Inquiry, Western Economic Association International, vol. 44(1), pages 169-184, January.
    9. Michael Waldman, 2003. "Ex Ante versus Ex Post Optimal Promotion Rules: The Case of Internal Promotion," Economic Inquiry, Western Economic Association International, vol. 41(1), pages 27-41, January.
    10. Edward Lazear & Paul Oyer, 2004. "The Structure of Wages and Internal Mobility," American Economic Review, American Economic Association, vol. 94(2), pages 212-216, May.
    11. Theofanis Tsoulouhas & Charles Knoeber & Anup Agrawal, 2007. "Contests to become CEO: incentives, selection and handicaps," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 30(2), pages 195-221, February.
    12. George Baker & Michael Gibbs & Bengt Holmstrom, 1994. "The Internal Economics of the Firm: Evidence from Personnel Data," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(4), pages 881-919.
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    Cited by:

    1. Bertheau, Antoine, 2021. "Employer Search Behavior: Reasons for Internal Hiring," Labour Economics, Elsevier, vol. 73(C).
    2. Jongsoo Kim & Richard Makadok, 2023. "Unpacking the “O” in VRIO: The role of workflow interdependence in the loss and replacement of strategic human capital," Strategic Management Journal, Wiley Blackwell, vol. 44(6), pages 1453-1487, June.
    3. Chacha Magasi, 2021. "Management succession planning and family-owned manufacturing businesses survival: The moderating role of firm’s background variables," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 10(8), pages 12-24, December.

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    More about this item

    Keywords

    internal promotion; external recruitment; lateral transfers; hiring;
    All these keywords.

    JEL classification:

    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions

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