DETERMINANTS OF ORGANIZATION JOB TRAINING
 EVIDENCE FROM THE 1996 NATIONAL ORGANIZATIONS
SURVEY
Song Yang
George Wilson
Assistant Professor
Department of Sociology and Criminal Justice
University of Arkansas
Fayetteville, Arkansas AR 72701
Associate Professor
Department of Sociology
University of Miami
Miami, Florida 33124
November 2002
*Direct all correspondences to Song Yang by writing to Department of Sociology and Criminal
Justice, University of Arkansas, Fayetteville, AR 72701, or by email to yangw@cavern.uark.edu
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DETERMINANTS OF ORGANIZATION JOB TRAINING
 EVIDENCE FROM THE 1996 NATIONAL ORGANIZATIONS
SURVEY
ABSTRACT
Recent changes in economic competitions have prompted organizations to adopt new
work practices that emphasize flexible work structures, quick response to customer request,
efficient systems for problem solving, and innovative pay structures. As a result of this
organizational transformation, employers no longer offer workers long-term job security within
one firm. Instead, organizations provide training to increase workers’ employability that
provides leverage to their future job hunt. However, organizations have shown great variations
in their dedication to build up workers’ employability. Analyzing the 1996 National
Organizations Survey (NOS), I found that (1) skill requirements, workplace formalization, and
organization internal labor market (FILM) were related to the odds of training provided to core
workers; (2) organizations that have difficulty recruiting workers with necessary skills invest
more money in training core workers than do organizations with less difficulty hiring competent
workers; and (3) institutionalization increased organization investment in core worker training,
provided that the organizations were less formalized. I further discuss research and theoretical
implications from those findings.
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DETERMINANTS OF ORGANIZATION JOB TRAINING
 EVIDENCE FROM THE 1996 NATIONAL ORGANIZATIONS
SURVEY
Company job training has tremendous impacts on individual career development,
organizational productivities, and national economic growth (Becker 1964; Becker 1993; Mincer
1958; Mincer 1962; Mincer 1991; Schultz 1961; Schultz 1963). The new wave of corporate
restructuring results in a new employment relation that emphasizes workers’ employability, and
boundaryless career rather than traditional job security with one firm (Cappelli, Bassi, Katz,
Knoke, Osterman, and Useem 1997; Grimshaw, Ward, Rubery, and Beynon 2001). However,
organizations exhibit significant variations in their training programs. Knoke and Kalleberg
(1994) reported that large organizations, formalized workplaces, organizations with extensive
firm internal labor market (FILM), organizations operating in a complex environment, and
organizations facing stiff competition were more likely to train their core workers than were
organizations of other types. Osterman (1995) found that core workers’ occupation, importance
of human resource considerations, organizational stands on make-or-buy strategy, and payment
of efficiency wages affected organizational training provisions. This research investigated how
company job was related to such factors as skill requirement, labor market competition,
workplace formalization, FILM, and institutionalization. The relations between those factors and
organization training have recently provoked keen research debate mainly on these three issues:
(1) how organizations make decisions to make or buy competent workers (Cappelli et al. 1997:
chapter 4; Knoke and Janowiec-Kurle 1999); (2) whether FILM loses its impact on organization
training in the era of workplace restructuring (Grimshaw et al. 2001); and (3) how organization
external influences affect organization internal practices, particularly organization training
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practices (Scott and Meyer 1991; Manahan, Meyer, and Scott 1994). Analyzing the 1996
National Organizations Survey, I addressed those issues and proposed many new research
questions that need future research investigation. The following paragraphs briefly review
relevant studies on those issues.
Operating in a labor market with much unpredictability in skill supply and demand, many
organizations adopt a new human resource strategy to directly poach workers already trained in
other workplaces and abandon their own regular training programs (Cappelli et al. 1997:124).
As a common and rational corporate strategy to deal with the turbulent economy, poaching
competent workers directly from other employers erodes organizational incentives to train
workers, and produces acute skill shortage in the entire labor market as less and less
organizations are willing to train workers. In the long run, the decrease of qualified job
candidates may drive up the price for those competent workers, making the poaching strategy
economically less feasible. Moreover, compared to locally trained workers inside the
organizations, external employees may encounter difficulty in acquiring competency in
company-specific requirements not only because of detailed production process, but also of
unique corporate cultures, both of which are readily accessible only to insiders (Cappelli et al:
1997: 125). Organizations facing increased skill requirements and a turbulent labor market may
pursue two strategies: pay high price to purchase skill labors from labor market or from other
employers (the buy strategy) or produce competent workers through internal training programs
(the make strategy) (Knoke and Janowiec-Kurle 1999). Empirical evidence suggested that
organizations emphasizing skill competency in hiring new workers provided less training to the
new workers than did organizations that did not stress skill competency in hiring (Osterman
1995).
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FILM stimulates organizations to provide more training because workers need necessary
skills to move from low-level positions to high-level positions with more responsibilities.
Organizations with extensive FILM train workers to facilitate their internal promotion through
the career ladder inside the organizations (Knoke and Kalleberg 1994; Knoke and Ishio 1996).
However, a more recent study showed that FILM was not related to training provision (Osterman
1995). Instead, a transformed work system -- high performance work organization -- was
positively related to increased- training effort. A common explanation for the declining impact
of FILM on company job training is as organizations flatten their hierarchical ladders and
increase their employment of contingent workers in response to intensified economic
competition, many of the career ladders inside the organizations collapse. FILMs cannot induce
organizations to provide more training, as they no longer bound workers to their organizations
(Grimshaw et al. 2001).
Organizations are not operating in a vacuum but in a concrete environment that largely
affects various organization practices. In their classic essay on organization field and
institutional isomorphism, DiMaggio and Powell (1983) described three institutional forces,
normative, mimetic, and coercive isomorphism, that made organizations in the same field similar
in their structures and practices. Scott and Meyer (1991) directly related institutional influences
to organization training programs. They argued that institutional agencies had the capacity and
power to shape organizations. Such agencies as the Occupational Safety and Health
Administration (OSHA), the earlier Comprehensive Education and Training Act (CETA), the
current U.S. Job Training Partnership Act, and various standards and requirements promulgated
by professional bodies either ruled or provided incentives for organizations to provide sufficient
training to workers. Scott and Meyer also emphasized institutional processes of training; that is
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as training become widespread, they also become more conventional and taken for granted. As a
result of institution processes, organizations are compelled to train workers irrespective of their
efficacies because training is a taken for granted benefit for workers. Monahan, Meyer, and
Scott (1994) asserted that organization-participant relations evolved from market and technical
model to citizenship model as organizations responded to education expansion, professional
proliferation, and increased emphasis on individual development. In the new citizenship model,
corporate workers consider themselves as corporate citizens and claim training as one of their
basic rights. In sum, institutional theorists contended that institutional influences exerted
tremendous impacts on organizational decisions to training workers.
However, institutional pressures do not affect all organizations the same. Organizations
exhibited great variation in their compliance with rules, regulations, moral suasion, and
prevailing social norms. Using data from the 1991 National Organizations Survey, Frumkin and
Galaskiewicz discovered that governmental organizations were more vulnerable to the three
types of institutional forces: coercive, mimetic, and normative pressures. The institutional
influences on for-profit business firms and nonprofit organizations were more sporadic. Indeed,
institutionalization effecting organizational practices through external agencies has to go through
organizational internal structures. Organizations with rigid internal structures are less responsive
to institutional pressures than are organizations with flexible structures.
The preceding paragraphs briefly reviewed the literature on training and organizational
characteristics, which indicated that an empirical investigation on the relations between training
and various organizational factors is needed to address the three issues that provoked ongoing
research debate. The following four subsections discuss in detail the relations between training
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and such factors as skill requirement, labor market condition, workplace formalization, FILM,
and institutionalization; a formal research hypothesis concludes each subsection.
JOB TRAINING AND SKILL REQUIREMENTS
Studies of jobs, occupations, and labor markets diverge on how technological change
affects skill requirements for jobs. Technological advancement and scientific management might
“deskill” jobs through machine automation or other technologies (Bailey 1990), but the
Workforce 2000 Report (Hudson Institute 1986) predicted a significant increase in high-skill jobs
in the new economy. Counter evidence to the high-skill argument indicated that a large portion
of the new jobs was still lower-skilled (Mishel and Teixera 1991), and the rate of shifting toward
high-skilled jobs in the 1980s was actually declining compared with previous generations
(Howell and Wolff 1991).
While the dispute for labor force “upskill” or “deskill” continues, evidence suggested that
the shortage was particularly acute for some types of work skills. Recent surveys indicated that
employers were very likely to report deficiencies in computational and problem-solving skills for
all job applicants, and deficiencies in interpersonal skills and poor attitudes toward work
particularly for entry-level applicants (Cappelli et al. 1997: 157). Facing skill shortages,
employers choose to make or buy skilled workers in need. While both strategies have its
advantages and disadvantages, the problem with buy strategy is more difficult to deal with than
is the problem with make strategy. For employers pursuing make strategy, the task is to keep
trained workers inside the organization to recoup their training investment, which becomes
particularly difficult when workers gain general skills and organizations operating in a labor
market with high turnover. However, employers always have a solution by cutting trainees’
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salaries during the training and raising their salaries after the training, thus providing incentives
for trained workers to stay (Becker 1964; Becker 1993). For employers pursing buy strategy, the
problem is how to quickly convey information only accessible to insiders to newcomers. Much
tacit knowledge such as highly specific and detailed processes, and unique corporate cultures
only accrues to current employees. In addition to the “technical” problem of buy strategy,
employers who aggressively poach skilled workers establish a poor image for themselves that
they are not committed to building up employability for workers. Once established, poor
reputations hamper organizational efforts to recruit competent workers (Scott and Meyer 1991).
H1: Organizations facing increased skill requirements provide more training to their core
workers than do organizations without increases in skill requirements.
JOB TRAINING AND LABOR MARKET CONDITIONS
Labor market conditions directly affect organizational choices between make and buy
strategy. A labor market that supplies abundant workers with necessary skills entices
organizations to purchase competent workers directly from the market. As a result, organization
internal training programs decline. In contrast, a tight labor market that has difficulty to provide
skilled workers in demand pushed organizations to develop their own training programs to
produce those workers. At business crests, such as the most recent one in Information
Technology (IT), neither market nor training programs can produce adequate high tech workers
in time, leaving many unfilled vacancies at considerable high wage rates. Recognizing the longterm reliance on high tech workers for company growth, software companies heavily invest in
training program to produce talented workers (Kanter 1995).
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H2: Organizations that encounter difficulty in hiring core workers with necessary skills
provide more training to core workers than do organizations without such a difficulty.
JOB TRAINING AND WORKPLACE STRUCTURES
Workplace structures are theoretically and empirically related to company training
programs and other human resources outcomes such as hiring, promotion, layoff, reward and
labor control (Baron and Bielby 1980; Granovetter 1981; Knoke and Kalleberg 1994). Two
workplace dimensions, formalization and firm internal labor market (FILM), exert direct impact
on company training programs (Knoke and Kalleberg 1994). Employers accomplish labor
control through formalization that codifies job tasks, occupational classifications, and various
aspects of employment relations such as job evaluations, and hiring/firing procedures.
Meanwhile, workplace formalization also creates obligations for employers to assist workers to
attain greater job proficiency through formal training programs (Knoke and Kalleberg 1994:
539). The relation between FILM and organization training is more complex. FILM ties
workers closely with their organizations by providing internal career ladders. In organizations
with highly developed FILMs, employers have strong incentive to train workers because (1)
organizations need to ensure workers possess necessary skills for internal career advancement;
and (2) the FILMs have prevented competitors from luring those trained workers away.
However, researchers report inconsistent results between FILM and job training (Knoke and
Kalleberg 1994; Osterman 1995). Osterman’s (1995) studies suggest that FILM had no effect on
company training, as opposed to Knoke and Kalleberg’s (1994) finding that FILM induced
organizations to provide more training. With erosion of internal job ladders, FILM can no loner
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tie employees with their organizations. Thus FILMs do not provide the classical incentive for
employers to train workers.
However, evidences indicating the positive relationship between FILM and company job
training outnumber reports of no relations between them (Hudson, Hooks, and Rieble 1994;
Knoke and Ishio 1996; Pfeffer and Cohen 1984). Knoke and Ishio’s (1996) research was based
on Knoke and Kalleberg’s (1994) findings that FILM had a very strong impact on organization
training, even after controlling for organizational size, unionization, workforce composition,
formalization, and external environments. Knoke and Ishio disaggregated the relationship
between FILM and organization training by types of occupations and found that FILM increased
organization training provided to white-collar workers and non-unionized blue-collar workers
(Kalleberg, Knoke, Marsden, Spaeth 1996:195). Indeed, researchers have long considered
training as a definite outcome of FILMs (Althauser and Kalleberg 1981; Doeringer and Piore
1971). In the classical FILM model, workers need formal training programs to receive necessary
knowledge to make career progression from low skill to high skill jobs. Although the recent
wave of workplace restructuring may mitigate the association between FILM and job training
(Capelli et al. 1997: 137), no empirical evidence indicates that workplace transformation,
general employability or boundaryless career reduce the impact of FILM on job training to a nil
(Grimshaw 2001: 49). The association between FILM and organization training cannot be
quickly dissolved.
H3: Organizations with highly formalized structures provide more training to core workers
than do organizations with less formalized structures.
H4: Organizations with well-developed FILMs provide more training to core workers
than do organizations with less-developed FILMs.
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JOB TRAINING AND ORGANIZATIONAL INSTITUTIONALIZATION
Researchers have long considered organizational institutionalization as an important
determinant of organization job training (Cappelli et al. 1997:127; Knoke and Kalleberg 1994;
Knoke and Janowiec-Kurle 1999:99; Manahan, Meyer, and Scott 1994; Osterman 1995; Scott
and Meyer 1991). Prevailing institutional conventions such as rules, regulations of legal
requirements, professional stipulations, common practices from peer organization, or general
social norms are driving forces for organizational training decisions. Organizations operating in
a concrete legal and culture environment are compelled to abide by rules, requirements from
regulatory agencies and professional associations, and moral suasions. Felstead and Green
(1994) discussed that institutional forces provide a training floor that prevents employers from
cutting organization training programs below certain threshold. They assert that the training
floor effect is particularly pronounced during economic recession when employers have strong
incentive to pull back training investment in workers.
However, organizations commonly embrace different internal structures that contain
various absorptive capacities to tailor changes to outside influences. Researchers studying
organizational change diverge on whether organizations can change rapidly enough to keep pace
with environmental changes. Those emphasizing structural fluidity argue that organization
adaptation, learning, strategic moves, and resource exchanges necessitate frequent workplace
restructuring (Lawrence and Lorsch 1967; Pfeffer and Salancik 1978; Levitt and March 1988).
Organizations are able to make swift changes in response to external influences. In contrast,
organization ecology insists that organizational forms are subject to strong structural inertia;
changes in organizational structures and activities would be slower than environmental changes
(Hannan and Freeman 1989). Empirical evidence suggested that organizational size,
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formalization, decision-making, and organizational accountability for performance are related to
organizational fluidity (Frumkin and Galaskiewicz forthcoming; Haveman 1992; Minkoff 1999).
Using data from 1991 National Organizations Survey, Frumkin and Galaskiewicz (forthcoming)
report that among the three types of organizations, governmental organizations, nonprofit, and
for-profit organizations, government organizations are much more vulnerable to institutional
forces than the other organizations. Due to lack of accountability for performance indicators
such as sales and profits, government organizations are in greater need of legitimacy to indicate
their success by conforming to institutional pressures than were other types of organizations.
Haveman (1993) asserts that workplace formalization created structural rigidity. Standard
operating rules reduce personalized relations in organizations and increase the use of
categorization as a decision-making technique, both of which decrease the extent of search for
alternatives (Haveman 1992:24). Analyzing data from California financial corporations from
1977 to 1986, Haveman (1992) found that large, and highly formalized organizations are more
prone to structural inertia that impede their ability to change and diversify.
I contend that in addition to organization performance measures, workplace formalization
is an important dimension that differentiates organizations in their accommodations to
institutional scrutiny. With their codified rules and regulations that extensively govern various
aspects in employment relations, highly formalized workplaces contain rigid structures that can
tolerate little adjustment in their work practices in response to external scrutiny. In contrast, less
formalized workplaces embrace more flexible structures that accommodate large-scale changes
as a result of institutional influences. In other words, workplace flexibility determines how
strongly institutionalization process can affect organizational practices. The more flexible the
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workplaces -- indicated by workplace formalization -- the stronger the impact of
institutionalization on organization practices.
H5: Organizations receiving strong institutional influences provide more training to their
core workers than do organizations receiving weak institutional scrutiny.
H6: The higher the workplace formalization, the weaker the relationship between
institutionalization and organization job training.
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Data
This section briefly describes the organizational dataset used to test the research
hypotheses. Complete description of this dataset can be found in the technical manual of the
1996-97 National Organizations Survey (Kalleberg, Knoke, and Marsden 1999). The 1996-97
National Organizations Study (NOS) was a national survey of diverse work establishments. The
Minnesota Center for Survey Research (MCSR) at the University of Minnesota conducted a
computer-assisted telephone interview (CATI) survey to collect the NOS data. The sample was
drawn from the Dun and Bradstreet (D&B) Market Identifiers list of approximately 15 million
establishments. D&B stratified the sample into 40 categories of increasingly broader employeesize ranges, from 1-4 to 4,000-4,999 and 5,000 or more. Within each stratum, D&B selected
cases for MCSR to interview that were sampled randomly with probability proportional to size
(PPS). This procedure was designed to obtain a final sample whose size distribution would
reflect the establishments experienced by typical employees. MCSR conducted most of the
CATI interviews with the human resources manager or a functionally equivalent informant from
each establishment; 11% of the completed interviews involved two or more informants. The
survey completion rate was 54.6% of eligible establishments, of which 86% were done by CATI
and 14% by mail questionnaire. The final sample contains data from 1,002 establishments.
Measures
The 1996-97 NOS primarily investigated the relations between organizational structural
properties and organizational human resource practices such as worker training, employment,
and hiring of contingent workers. To capture the main products or services provided by
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organizations, principal investigators asked organizational informants to identify their focal/core
occupation, defined as “those job titles for the employees who are most directly involved with
the main product or service provided by the organizations. (Kalleberg, Knoke, and Marsden
1999).” For example, professors are the core occupants in universities; computer engineers are
the core occupants in computer technology firms (Microsoft); medical doctors are the core
occupants in hospitals. Totally 986 organizations identified their core occupations. 15 percent
of them had managerial occupations as their core occupation; 28 percent had
professional/technical as their core occupation; 56 percent had blue-collar occupations as their
core occupations, which include clerks, farmers, machine operators, crafts, and others.
Company job training is the dependent variable that contains five different aspects.
Training provided to core employees is a dummy dependent variable that was measured by
asking “In the past two years, did organization provide any (core occupants) with formal job
training? (Yes = 1, no = 0)” Approximately 59 percent of 945 organizations provided formal
training to core employees. To further investigate the relation between training and various
factors for each specific occupation group, I disaggregated core training provision into three
different occupational groups: training provided to managerial core employees, training provided
to professional/technical core employees, and training provided to blue-collar core employees.
According to the occupation classification code in 1980 census
(http://www.icpsr.umich.edu/GSS/rnd1998/appendix/occu1980.htm), organizations with core
occupation title code from 001 to 037 are coded as managerial core organizations, those with
core occupation titles from 043 to 235 are coded as professional/technical core organizations,
and those with other core occupation titles are coded as blue-collar core organizations, which
mainly have crafts, clerks, machine operators, or farmers as their core workers. The 1996 NOS
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contained 150 managerial core organizations, 283 professional/technical core organizations, and
553 blue-collar core organizations. Totally 141 managerial core organizations, 266
professional/technical core organizations, and 532 blue-collar core organizations responded to
the questions asking about core training. Among them, 52 percent managerial core organizations
provided training to their core managers, 61 percent professional/technical core organizations
provided training to their core professional/technical employees, 60 percent blue-collar core
organizations provided training to their blue-collar core employees. Training investment is
captured by a question, “Over the past two years, how much money did organization invest in
formal training of core occupations?” I took the natural log of the actual amount. Because the
natural log function cannot take 0 as the base, I converted all 0’s to 0.5. Because those
organizations providing no training did not respond to the training investment question, only a
sub-sample of 217 organizations that provided training supplied information on their training
investment.
Skill requirement is captured by a question, “In the past two years, have the skills
required to perform (core occupation) jobs at an acceptable level increased, decreased, or
remained the same in your organizations?” I coded organizations responding “skill increase” as
1, and those with “skill decrease” or “remain the same” responses as 0. Totally 53 percent of
1,002 organizations reported that skills required to perform core jobs increased during the past
two years.
Hiring core workers with necessary skills is measured by a question, “How easy is it for
organization to hire core workers with the necessary skills … very easy (1), somewhat easy(2),
not too easy (3), and not at all easy (4). A range from 1 to 4 indicates variation from the least
difficult to the most difficult to hire skilled workers. Totally 930 organizations responded to the
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question, producing a mean value (2.53), a median value (3.00) and standard deviation (0.94) in
this measure.
Workplace formalization is indicated by a series of questions “Do each of the following
documents exist at (org)?: written job description, written record of job performance,
employment contracts, documents about doing personnel evaluation, documents outlining,
hiring/firing procedure.” Agreement to each question is coded as 1; the results are summed up,
producing a range from 0 to 5, which indicates variation from low formalization to high
formalization. Totally 913 organizations completed the questions, producing the formalization
measure with a mean (3.24), a median (4.00) and a standard deviation (1.69).
Firm internal labor market (FILM) is measured by three questions. 1. How often does
(ORG) fill (CORE OCC) vacancies with people already employed at (ORG) . . . never (1), rarely
(2), often (3), or very often (4)? 2. When you fill (CORE OCC) jobs above the entry level, how
important is it to give preference to someone already employed in the organization . . . not
important (1), slightly important (2), moderately important (3), Very important (4)? 3. How
often does internal promotion happen . . . never (1), rarely (2), often (3), or very often (4)? The
results are summed up and divided by 3 to produce a score of FILM for 930 organizations, which
has a mean value of 2.21, a median value of 2.33, and a standard deviation of 0.79.
Institutionalization is measured by three questions. 1. Are any of org’s training programs
subject to periodic reviews by outside accreditation or licensing orgs? 2. Does org consult with
any association of organizations in developing its training program? 3.To what extent does org
pay attention to the training practice of other orgs….. not at all, very little, somewhat, or very
much? Agreement to the first two questions is coded as 1. Very much response to the third
question is coded as 1. The results are summed up, producing an institutionalization measure
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with mean value of 1.08, median value of 1, and standard deviation of 0.99. Because only
organizations providing training responded to the institutionalization questions, a sub-sample of
604 organizations have scores on institutionalization, which is used to explain variations in
training investment among the 604 organizations providing training to core workers.
Formalization * Institutionalization is the interaction term to investigate whether the
relation between institutionalization and training investment varies with workplace
formalization. Because formalization and institutionalization may have high correlation with the
interaction term, including all three factors as independent variables produces a common
problem called multicollinearity, which produces an inability to estimate the requested equation
(Bohrnstedt and Knoke 1994: 300). To reduce the multicollinearity between formalization,
institutionalization, and their interaction term, I apply the centering method to formalization and
institutionalization by subtracting their means from their values prior to their multiplication. The
centering method not only reduced the multicollinearity between the main terms (formalization
and institutionalization) and their interaction term (formalization * institutionalization), but also
simplified interpretation of the interaction effect (Aiken and West 1991: 35).
Controlled variables include organization main market competition, foreign market
competition, ability to attract and retain essential workers, for profit organizations, organization
size, organization age, women percentage in core workers, white percentage in core workers,
organization family friend program, and parent organizations. Researchers have found those
listed variables exerted effects on company training programs (Knoke and Kalleberg 1994;
Osterman 1995). Controlling for those variables eliminates the possibility of spuriousness in the
observed relationships between training and various predictors under investigation (Bohrnstedt
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and Knoke 1994: 236). Table 1 shows a complete description of measuring items, and coding
methods. Table 2 displays the descriptive statistical information for all the variables.
Research Method
Because 41 percent of the NOS establishments provided no formal core employee
training, the remaining organizations may comprise a biased sample for estimating the effects of
the hypothesized predictors of the training investment. That is, using a sub-sample only
consisting of organizations providing training would not provide a reliable estimate of training
investment for those organizations providing no training had they provided training. I corrected
for potential sample selection biases by applying the two-step Heckman method (Heckman
1979). The first stage involves a probit equation, using data on all establishments, which
predicts the probability that an organization provides any core employee job training program.
The coefficients from this selection equation are then used to compute an estimated value of the
inverse Mills ratio (lambda) for each observation, which captures the probability that an
organization failed to provide training conditional on the risk of training. This variable is then
included in the second-stage substantive equation, which estimates the unbiased effects of the
hypothesized predictors on the training investment. To comply with the requirement for
conducting the Heckman method (Allison 2001), I drop one variable (for profit organization)
from the substantive equation (training investment model) to distinguish the two models (the
“training provided to core employees” model, and the “training investment” model).
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Findings
Table 3 reports the unstandardized coefficients from logistic regression of company core
training provision, company core managerial training provision, company core
professional/technical training provision, and company core blue-collar training provision.
Because only organizations providing training responded to the institutionalization questions,
institutionalization and the interaction term of institutionalization and formalization are not
included in the model predicting training provision. In support of H1, organizations facing
increased skill requirements have 81 percent (Exponential of (0.591) = 1.81) higher odds of
providing training to their core workers than do organizations that do not face increased skill
requirements. Rather than buying skilled workers directly from the labor markets, organizations
with increases in their skill requirements develop their own training programs to make those
workers with skills in demand. In support of H3, each unit of increase in workplace
formalization increases the odds of core training provision by 30 percent (Exponential of (0.259)
= 1.30). On the one hand, workplace formalization facilitates organizational control of workers
through codified rule, and regulations on various employment issues such as hiring/firing, job
promotion, and evaluation. On the other hand, formalization produces an obligation that
employers need to help workers to upgrade their skills through extensive organization training
programs. Empirical evidence also supports H4 that FILM increases company training workers.
Each unit of increase in FILM increases the odds of core training provision by 65 percent
(Exponential of (0.498) = 1.65). Despite recent evidence indicating erosion of internal career
ladders and reduced impact of FILM on various outcomes such as training and organizational
commitment, I found that FILM is still one of the most significant predictors inducing
organizations to supply more training to workers. Organizations with extensive FILM need to
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supply adequate training to ensure smooth transition for workers moving from low-level jobs to
high-level positions. The results also shown that whether organizations had problem finding
competent workers with necessary skills is not related to organization core training provisions.
To further investigate the relationships between training and various organizational
factors, I disaggregate the core training provision by three occupational groups: core training
provision to managers, core training provision to professional/technical workers, and core
training provision to blue-collar workers. Table 3 reports that those significant predictors in core
training provision also exerted significant impacts on core training provided to blue-collar
workers, only with slight changes in the magnitudes of the impacts. However, skill increase and
workplace formalization do not affect core training to managerial/professional/technical (MPT)
employees. Increase in skill requirement, codified rules and regulations are only favorable to
blue-collar core workers in obtaining formal job training. Researchers assert that workplace
formalization is mainly used to accomplish labor control of blue-collar rank-and-file workers
(Edwards 1979; Edwards 1984). This result indicates that while blue-collar workers are subject
to more rigid control than are MPT workers, they recoup the corresponding benefits by
submitting to those formal rules that produce an obligation for employers to train workers. In
contrast, MPT workers are not subject to the control of formal rules, nor are they receiving the
benefits from those workplace regulations. Why increase in skill requirement only affects core
training provided to blue-collar workers deserves future investigation. One plausible explanation
is that the nature of skills required to perform blue-collar jobs is different from that of MPT jobs.
The skills for blue-collar jobs are highly firm-specific; only internal training programs can
produce the blue-collar job skills with rich firm-specific knowledge. In contrast, MPT jobs
require much general skills resulting from long term human capital investment, which makes the
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strategy to purchase competent MPT workers directly from the labor market a more feasible
solution to the skill deficiency than does the make strategy to produce those MPT workers
internally.
Table 4 reports the unstandardized coefficients from OLS regression of core training
investment. Because only organizations providing training responded to the investment
question, this round of analysis applied to only 181 establishments, a significant drop in total
number of cases from previous analysis of core training provision with 696 establishments.
Because the model is susceptible to sample selection bias problem due to nonrandom missing
cases, I used the Heckman’s sample selection method to correct for the bias problem. The core
training provision model in Table 3 is the selection model for the investment model. The
variable “for profit organization” is dropped from the investment model to distinguish the two
models in compliance with the requirement for Heckman method (Allison 2001).
Table 4 shows that the lambda is significant, indicating a presence of sample selection
bias, for which my model has controlled. In contrast to their effects on core training provision,
skill requirement increase, workplace formalization, and FILM are not related to the core
training investment. The results support H2 that the more difficult it is for establishments to hire
competent workers, the more training they provide to train their workers. Each unit of increase
in the difficulty to hire workers with necessary skills increases the monetary investment in core
worker training by 87 percent (Exponential of (0.628) = 1.87). The results do not support H5
that the greater the institutionalization, the more the organization provided training. However,
the interaction term of institutionalization and workplace formalization appears to be significant,
indicating that the impact of institutionalization is contingent upon the degree of workplace
formalization. To investigate the contingent impact of institutionalization on training investment
22
upon workplace formalization, I disaggregated the formalization into low, median, and high
levels and regressed the investment on the institutionalization at each level of formalization.
Table 5 reports the results of coefficients of institutionalization on core training investment at
these three levels of formalization. (The notes following Table 5 spelled out the computation
procedure in producing the coefficients and their corresponding standard errors shown in Table
5). In support of H6, the impact of institutionalization on training investment declines with the
increase in workplace formalization. At low levels of workplace formalization, each unit of
increase in institutionalization increases the core training investment by 86 percent (exponential
of (0.62) = 1.86), whereas the impacts of institutionalization decrease to non-significance at
median and high level of workplace formalization. This result suggests that institutionalization
does not affect all organizations the same (see also Frumkin and Galaskiewicz forthcoming).
Highly formalized establishments contain structural inertial (Haveman 1992) that hinders their
ability to change in compliance with institutional scrutiny. While institutionalization induces
organizations to provide more training, less formalized workplaces encounter fewer obstacles to
accommodate the institutional influences than do the highly formalized workplaces, which
contain those fully enforced rules and regulations that leave little room for restructuring.
Consequently, institutionalization exerted a stronger impact on organization training in
establishments with low formalization than in establishments with median or high levels of
formalization.
Conclusion
Using the 1996 National Organizations Survey with 1,002 U.S. establishments, this
research investigated how organization training was related to various organizational factors
such as organizational skill requirements, labor market condition, workplace formalization, firm
23
internal labor market (FILM), and institutionalization. To summarize several major findings, (1)
organizations reporting an increase in skill requirement are more likely to provide training to
core workers than are organizations reporting decrease or no change in skill requirements; (2) an
increase in skill requirements induces organizations to provide more training only to blue-collar
core workers, not to managerial/professional/technical (MPT) core workers; (3) the more
difficult it is for organizations to hire core workers with necessary skills, the more money the
organizations invest in training core workers; (4) the more formalized the organizations, the
more likely the organizations supply training to their core workers; (5) the effect of formalization
on core training provision appears to be significant only for blue-collar core workers, not for
MPT core workers; (6) the greater the FILM, the more likely the organizations provide training
to core workers; (7) the effect of FILM on core training provision is significant for all core
workers regardless of their occupations; (8) the effect of institutionalization on core training
investment is contingent on workplace formalization, institutionalization exerted significant
impact on core training investment only when organizations embrace low levels of formalization.
Although organizations facing skill increases or difficulty in finding competent workers
have strong incentives to poach skilled employees from other employers (Cappelli et al. chapter
4 and 5), my research indicates there could be several impediments that jeopardize the
effectiveness of the poach strategy. Many skills in shortage for organizations are firm-specific
that can be effectively produced only through in-house training programs. Even with the
required skills, outsiders commonly encounter long-term adjustment to fully deploy their skills
into the workplaces. This may explain why skill increase only increase training provided to
blue-collar core workers, not MPT core workers. Machine operators, sales clerks, cashiers, and
tool makers need skills that require relatively short term training embedded in their unique work
24
environments, which make the buy strategy less feasible than the make strategy for organizations
facing skill shortage. Through provision of internal training program, organizations can quickly
produce those skills with relatively simple on-site illustrations and a series of classroom
instructions. In contrast, managers, scientists, engineers, consultants, medical doctors, and
professors need skills that require decades of formal education and years of experience. A skill
shortage created by economic restructuring in those MPT workers can not be easily solved
through short-term organization training programs. Kanter (1995) illustrates that IT companies
have to rely on their professional networks to recruit computer engineers when IT booming
produces an acute shortage of IT engineers in the field. Meanwhile, formal education systems
and various occupation schools, with their highly standardized systems, produce MPT workers
who are well-trained to tailor unique work environments and quickly deploy their skills in the
workplaces (Haque and Pawar 2001). Future research may empirically test this allegation,
focusing on these two questions: (1) whether skill deficiencies in blue-collar workers are more
firm-specific than MPT workers; and (2) how this difference affects organization solutions to the
skill shortage.
Workplace formalization is used to accomplish labor control and coordination,
particularly for organizations with large-scale operations (Kalleberg et al. 1996: 69-113).
However, rigid rules and regulations are not used to monitor and manage managerial,
professional, and technical jobs, which need great job flexibility and discretion (Edwards 1984).
Instead, employers used rigid rules elicit behavioral predictability and responsibility from bluecollar workers. Thus, while formalization stimulates organizations to provide more training
(Knoke and Kalleberg 1994), the relations between formalization and training only apply to bluecollar workers, who are subject to the highest level of control under workplace rules and
25
regulations. Later studies may investigate how the new wave of workplace restructuring affects
the relation between formalization and training. For example, while organizational restructuring
dissolves the traditional employment relations and organizations increasingly rely upon external
labor market to recruit skilled labors (Cappelli et al. Chap 6), whether establishments with high
levels of formalization still consider job training as an integral component of large human
resources programs deserves further investigation. A research project can broadly study the new
methods to control and coordinate workers in transformed organizations, and the consequences
of the workplace restructuring on training for workers in different positions.
FILM is associated with greater training efforts for all employees, irrespective of their
occupations. Despite recent studies that show a diminishing impact of FILM on company
training programs (Grimshaw et al. 2001; Osterman 1995), my research suggests that FILM is
still a strong stimulant for organization training. The more extensive the FILM, the more likely
the organizations to provide training to core workers to prepare them for advanced positions with
better pay, prestige, and more responsibilities (Kalleberg et al. 1996:197). However, although
many researchers have investigated the relation between FILM and training, very few
empirically investigate how FILM was related to different types of training such as general
versus specific training (Becker 1993) or social versus technical training (Green 2000).
Assuming internal promotion from low-skill jobs to high-skill jobs requires mostly firm-specific
skill upgrading, it is plausible to hypothesize that the relation between FILM and firm-specific
training is stronger than the relation between FILM and general training. This allegation
deserves further empirical investigation.
The most striking result of my research is that institutionalization does not affect all
organizational training programs the same. Less formalized workplaces are more vulnerable to
26
institutional influences than are highly formalized establishments. Based on previous research
findings that formalization induces structural inertia (Haveman 1992), which has the
consequence of lowering organizational responsiveness to external stimuli (Larsen and Lomi
1999), I predicted and found institutional influences of company training is more pronounced in
less formalized workplaces where structural inertia is low than in highly formalized
establishments where inertia is high. Future research may broadly study how the interaction
between external influence and internal structural responsiveness affects adoption and
implementation of various organizational practices such as performance-based pay structure,
problem-solving teamwork, and flattened work systems, in addition to organization training
programs. At more aggregate levels, researchers can investigate how industrial inertia, indicated
by age, formalization, and regulations for the entire industry, may affect cross-industrial
differences in the proliferation of various practices such as technological innovations and work
structural transformations.
I empirical examined company training programs as results of various organizational
characteristics such as skill requirements, labor market competitions, formalization and FILM,
institutionalization, and the interaction between institutionalization and formalization. Job
training itself has numerous impacts on individual job security, pay increase, career
advancements, on firm productivity, and on national economic growth (Becker 1993; Mincer
1991; Schultz 1961). An ambitious research project may investigate both the determinants and
the consequences of company job training and reveal how training plays a critical role in social
process of inequality; for example, how training perpetuates the income gap between men and
women, and between managerial/professional/technical workers and blue-collar workers.
Company job training is a complex process that defies simple summation. My research used a
27
cross-sectional, organization-level dataset to investigate the determinants of company job
training. To better understand the determinants and consequences of company job training, a
longitudinal and cross-level dataset is desirable, which requires suitable research design and data
collection.
28
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