Overview

In this chapter, we study recruitment and promotion patterns in Japanese internal labor markets. We do this in two ways. First, we use personnel data to look at entry, exit, and promotion in large Japanese companies. In spite of the revival in the interest on internal labor markets, empirical research in these areas has been relatively scarce, both in Japan and elsewhere. The reason is that personnel data, the main source of information, are not usually available to the applied researcher. Second, we review in detail other empirical studies, both in Japan and elsewhere, and place our own research in a wider perspective.

The common view on recruitment and promotion in large Japanese firms can be summarized as follows: (1) promotion is seniority-based and a late selection approach prevails; (2) the allocation of workers to jobs is centralized; (3) there is extensive job rotation, with internal transfers; (4) there are well defined ports of entry, and a strong preference for recruitment of school graduates.

Relevant evidence in support of the common view comes from the pioneering work by Ronald Dore (1973) on Hitachi Corporation, a company also studied by Aoki (1988) in his economic treatise on the Japanese firm. Important additional Japanese evidence is provided by the well known fieldwork carried out by Kazuo Koike (1981). In the United States, relevant empirical research is reviewed by Baker, Gibbs and Holmstrom (1994a) in their influential work based on the personnel data file of a large American firm.