GIVEN THE “insiderist” nature of Japanese organisations and the propensity for Japanese employees to stay at the firm they join on leaving university, it is difficult to overstate the importance of the recruitment process in Japanese firms. In terms of selection, the company is obliged to take extraordinary care to ensure that they are getting the right people, as the consequences of hiring the wrong person are much greater than in an environment where there is an active external labour market. For the student, the price of picking the wrong company is similarly great, as it will be all the more difficult to change track later in his or her career. In practice, this means extensive use of examinations, a lengthy interview process, heavy reliance on introductions and personal background checks (Beck and Beck, 1994 ; Rohlen, 1974). Traditionally there has been a great deal of involvement of young alumni who are one or two years into the company. At some fi rms they have formed teams to identify potential talent at their former universities, called the “rikuruta seido” or “recruiter system”.

The focus on graduate recruitment and training employees up internally means that, for the company, there is little incentive to hire people mid-career. Indeed, there has been an implicit code of restraint on the part of larger firms in the hiring of employees, particularly skilled ones, from other firms (Aoki, 1988).