Internal labor markets: Labor-process and market-power effects

In contrast to previous research incorporating organization- or industry-level factors, this paper utilizes a job-level perspective to test the effects of labor process and market-power variables on the internalization of employment relationships. We hypothesized that four job-level considerations affect the use of internal labor markets: interdependence (i.e., interpersonal complexity), information impactedness (i.e., informational complexity), union representation, and firm-specific skills. Data on 250 jobs at 19 firms in six industries surveyed by the U.S. Bureau of Employment and Training's Occupational Field Analysis Centers were used to test the hypotheses. Analyses revealed that firm-specific skills interacted to varying degrees with both interdependence and information impactedness to predict the use of internal labor markets, as do information impactedness and union representation. At the same time, union representation was found to attenuate the relation between interdependence and such internalization. We discuss the implications of these results for studying employment arrangements, as well as for making public-policy and strategic-management decisions.