Teaching Old Dogs New Tricks: Acquisition or Accumulation of Resources?

Abstract

This study examines the tradeoffs between accumulating resources internally and acquiring resources in strategic factor markets. In the labor market context, I consider the performance implications of external hiring and internal development of human capital resources in a panel study of 3,033 Danish manufacturing firms. The study provides empirical evidence that hiring experienced workers is unprofitable, whereas building human capital resources internally is. Building human capital resources successfully appears in part to be conditional on a certain amount of on the job screening.

Keywords: Firm-specific human capital, strategic human capital, firm performance, screening, panel data

JEL Classification: C23, M10, M12, M50, M51, J6, J24, D24