Costs, commitment, and rewards: factors influencing the design and implementation of internal labor markets

Much research on internal labor markets has been hampered by the failure to differentiate the wide variety of ILMs, by accounts of their determinants that too heavily emphasize isolated causal factors, by the lack of detailed material describing the economic and organizational dimensions of their design and implementation, and by the neglect of managerial perceptions of and motivations for constructing ILMs. This paper presents detailed case studies of three organizations that have constructed very different ILMs. Based on this material, a model of the determinants of ILMs is developed that centers around the concepts of costs, commitment, and rewards and that attempts to assess the interactions of effects of markets and hierarchies on ILMs. The model is built on the premise that the underlying imperatives typically held to affect ILMs are inevitably filtered through managerial beliefs and the constraints on managerial decision making. The implications of these findings for theory and research on ILMs are discussed.