The author illustrates the utility of institutional labor economics and makes a case for a reconsideration of it. Two recent developments motivate this effort: the rise of New Personnel Economics (NPE) as a significant subfield of labor economics and the substantial shifts in work organization that have taken place since the 1990s. Understanding how and why firms have reorganized work opens the door for a renewed interest in institutional approaches. The author explains that the rules of institutional labor markets (ILMs) emerge from the competition between organizational interest groups—unions, personnel professionals, and the government—and competing views of firms' objectives, resulting in the rise of ILMs, the slow diffusion of High Performance Work Systems, strategies used to obtain a high level of commitment from workers, the use of contingent employees, and the spread of new promotion rules in response to equal employment opportunity pressures. As such, the role of power and influence in establishing work rules is of central concern, though more conventional NPE considerations also remain important.
References
1.
AbrahamKatharine G.TaylorSusan K., 1996. “Firms' Use of Outside Contractors: Theory and Evidence.”Journal of Labor Economics, Vol. 14, No. 3, pp. 394–424.
2.
AcemogluDaronPischkeJörn-Steffan. 1999. “Beyond Becker: Training in Imperfect Labor Markets.”Economic Journal, Vol. 109, No. 453, pp. 112–42.
3.
AbbottAndrew. 1988. The System of Professions: An Essay on the Division of Expert LaborChicago: University of Chicago Press.
4.
AkerlofGeorgeKrantonRachel. 2005. “Identity and the Economics of Organizations.”Journal of Economic Perspectives, Vol. 19, No. 1, pp. 9–32.
5.
ArthurW. Brian. 1989. “Competing Technologies, Increasing Returns, and Lock-In by Historical Events.”Economic Journal, Vol. 99, No. 394, pp. 116–31.
6.
AutorDavid. 2003. “Outsourcing at Will: The Contribution of Unjust Dismissal Doctrine to the Growth of Employment Outsourcing.”Journal of Labor Economics, Vol. 21, No. 1, pp. 1–42.
7.
BakerGeorgeGibbsMichaelHolmstromBengt. 1994. “The Wage Policy of the Firm.”Quarterly Journal of Economics, Vol. 109, No. 4, pp. 921–55.
8.
BakerGeorgeHolmstromBengt. 1995. “Internal Labor Markets: Too Many Theories, Too Few Facts.”American Economic Review, Vol. 85, No. 2, pp. 255–59.
9.
BarleyStephen. R.1989. “Careers, Identities, and Institutions: The Legacy of the Chicago School of Sociology.” In ArthurMichael B.HallDouglas T.LawrenceBarbara S., eds., Handbook of Career Theory, pp. 41–65. New York: Cambridge University Press.
10.
BarleyStephen. R.MeyerGordon W.GashDebra C., 1988. “Cultures of Culture: Academics, Practitioners, and the Pragmatics of Normative Control.”Administrative Science Quarterly, Vol. 33, No. 1, pp. 24–60.
11.
BarleyStephen. R.MeyerGordon W.GashDebra C., 1986. “Technology as an Occasion for Structuring: Evidence From Observations of CT Scanners and the Social Order of Radiology Departments.”Administrative Science Quarterly, Vol. 31, No. 1, pp. 78–108.
12.
BaronJames N.DobbinFrankJenningsP. Devereaux. 1986. “War and Peace: The Evolution of Modern Personnel Administration in U. S. Industry.”American Journal of Sociology, Vol. 92, No. 2, pp. 350–83.
13.
BaronJames N.BurtonM. DianeHannanMichael. 1999. “Engineering Bureaucracy: The Genesis of Formal Policies, Positions, and Structures in High-Technology Firms.”Journal of Law, Economics, and Organization, 1999, Vol. 15, No. 1, pp. 1–41.
14.
BaronJames N.KrepsDavid. Forthcoming. “Employment as an Economic and a Social Relationship.” In GibbonsRobertRobertsJohn, eds., Handbook of Organizational Economics, Princeton: Princeton University Press.
15.
BattRosemary. 2002. “Managing Customer Services: Human Resource Practices, Quit Rates, and Sales Growth.”Academy of Management Journal, Vol. 45, No 3, pp. 587–97.
16.
BattRosemaryMoynihanLisa. 2002. “The Viability of Alternative Call Center Production Models.”Human Resource Management Journal, Vol. 12, No 4, pp. 14–34.
17.
BeerMichaelCannonMark. 2004. “Promise and Peril in Implementing Pay For Performance.”Human Resource Management, Vol. 43, No. 1, pp. 3–48.
18.
BloomNicholasVan ReenenJohn. 2007. “Measuring and Explaining Management Practices Across Firms and Countries.”Quarterly Journal of Economics, Vol. 122, No. 4, pp. 1351–408.
19.
BoyerGeorgeSmithRobert. 2001. “The Development of the Neoclassical Tradition in Labor Economics.”Industrial and Labor Relations Review, Vol. 54, No. 2, pp. 199–223.
20.
BurawoyMichael. 1979. Manufacturing Consent. Chicago: University of Chicago Press.
21.
BurtonM. Diane. 2001. “The Company They Keep: Founders' Models for Organizing New Firms.” In SchoonhovenClaudia B.RomanelliElaine, eds., pp. 13–39. The Entrepreneurship Dynamic: Origins of Entrepreneurship and the Evolution of Industries. Stanford: Stanford University Press.
22.
CascioWayne. 2006. “Decency Means More Than ‘Always Low Prices’: A Comparison of Costco To Wal-Mart's Sam's Club.”Academy of Management Perspectives, Vol. 20, No. 3, pp. 26–37.
23.
CappelliPeterCrocker-SmithAnne. 1996. “Distinctive Human Resources Are Firms' Core Competencies.”Organizational Dynamics, Volume 24, No. 3, pp. 7–22.
24.
CappelliPeterCrocker-SmithAnne. 1999. The New Deal At Work. Boston: Harvard Business School Press.
25.
ChoiSeungheeLeiterJeffreyTomaskovic-DeveyDonald. 2008. “Contingent Autonomy: Technology, Bureaucracy, and Relative Power in the Labor Process.”Work and Occupations, Vol. 35, No. 4, pp. 422–55.
26.
Coyle-ShapiroJacqueline A-M.1999. “Employee Participation and Assessment of an Organizational Change Intervention: A Three-Wave Study of Total Quality Management.”The Journal of Applied Behavioral Science. Vol. 35, No. 4, pp. 439–56.
27.
CrozierMichel. 1967. The Bureaucratic Phenomenon. Chicago: University of Chicago Press.
28.
CyertRichardMarchJames. 1963. A Behavioral Theory of the Firm. Englewood Cliffs, NJ: Prentice-Hall.
29.
DiMaggioPaul J.PowellWalter W., 1983. “The Iron Cage Revisited: Institutional Isomorphism and Collective Rationality in Organizational Field.”American Sociological Review, Vol. 48, No. 2, pp. 47–160.
30.
DobbinFrankSuttonJohnMeyerJohnScottW. Richard. 1993. “Equal Opportunity Law and the Construction of Internal Labor Markets.”American Journal of Sociology, Vol. 99, No. 2, pp. 396–427.
31.
DobbinFrankSuttonJ., 1998. “The Strength of a Weak State: The Employment Rights Revolution and the Rise of Human Resources Management Divisions.”American Journal of Sociology, Vol. 104, No. 2, pp. 441–76.
DunlopJohn. 1950. Wage Determination Under Trade Unions. New York: Augustus Kelley.
34.
DunlopJohn. 1957. “The Task of Contemporary Wage Theory.” In TaylorGeorgePiersonFrank, eds., pp. 117–39. New Concepts In Wage Determination. New York: McGraw-Hill.
35.
DunlopJohn. 1958. Industrial Relations Systems. New York: Henry Holt.
36.
DunlopJohn. 1966. “Job Vacancy Measures and Economic Analysis.” In The Measurement and Interpretation of Job Vacancies, pp. 27–48. New York: Columbia University Press.
37.
EdelmanLauren B.1990. “Legal Environments and Organizational Governance: The Expansion of Due Process in the American Workplace.”American Journal of SociologyVol. 95, No. 6, pp. 1401–40.
38.
EdelmanLauren B.AbrahamStevenErlangerHoward. 1992. “The Professional Construction of the Law: The Inflated Threat of Wrongful Discharge.”Law and Society Review, Vol. 26, No. 1, pp. 47–83.
39.
FarberHenry S.GibbonsRobert. 1996. “Learning and Wage Dynamics.”Quarterly Journal of Economics, Vol. Ill, No. 4, pp. 1007–47.
40.
FreidsonEliot. 1970. Professional Dominance. Chicago: Aldine.
41.
FreidsonEliot. 1999. “Careers In Organizations: Theory and Evidence.” In AshenfelterOrleyCardDavid, eds., Handbook of Labor Economics, Vol. 3, pp. pp. 2373–437. Amsterdam: Elsevier.
42.
FreidsonEliot. 2004. “Task-Specific Human Capital.”American Economic Review, Vol. 94, No. 2, pp. 203–07.
43.
FreidsonEliot. 2006. “Enriching a Theory of Wage and Promotion Dynamics Inside Firms”Journal of Labor Economics, Vol. 24, No. 1, pp. 59–108.
44.
GibbsMichaelHendricksWallace, “Do Formal Salary Systems Really Matter?”Industrial and Labor Relations Review, Vol. 58, No. 1, pp. 71–93.
45.
GittellJody Hoffer. 2003. The Southwest Airlines Way: Using the Power of Relationships to Achieve High Performance. New York: McGraw-Hill.
46.
GouldEric. 2002. “Rising Wage Inequality, Comparative Advantage, and the Growing Importance of General Skills in the United States.”Journal of Labor Economics, Vol. 20, No. 1, pp. 105–47.
47.
GouldnerAlvin. 1954. Patterns of Industrial Bureaucracy. Glencoe, IL: Free Press.
48.
GreenhouseSteven. 2005. “How Costco Became the Anti-Walmart”New York Times, 17 July, Section 3, p. 1.
49.
HallPeterSoskiceDavid, eds. 2001. Varieties of Capitalism: The Institutional Foundations of Comparative Advantage. New York: Oxford University Press.
50.
HandelMichaelGittlemanMaury. 2004. “Is There a Wage Payoff to Innovative Work Practices?”Industrial Relations, Vol. 43, No. 1, pp. 67–98.
51.
HannanMichael T.2005. “Ecologies of Organizations: Diversity and Identity.”Journal of Economic Perspectives, Vol. 19, No. 1, pp. 51–70.
52.
HannanMichael T.FreemanJohn. 1983. “Structural Inertia and Organizational Change.”American Sociological Review, Vol. 49, No. 2, pp. 149–64.
53.
HodgsonGeoffrey. 1998. “The Approach of Institutional Economics.”Journal of Economic Literature, Vol. 36, No. 1, pp. 166–92.
54.
HodsonRandy. 1997. “Group Relations At Work.”Work and Occupations, Vol. 24, No. 4, pp. 426–52.
55.
HodsonRandy. 1999“Organizational Anomie and Worker Consent.”Work and Occupations, Vol. 26, No. 3, pp. 292–323.
56.
HousemanSusanOsawaMachiko, eds. 2003. Non-Standard Work in Developed Economies. Kalamazoo, MI: W.E. Upjohn Institute of Employment Research.
57.
IchniowskiCaseyShawKatherinePrennushiGiovanna. 1997. “The Effects of Human Resource Management Practices on Productivity: A Study of Steel Finishing Lines.”American Economic Review, Vol. 86, No. 3, pp. 291–313.
58.
JackellRobert. 1988. Moral Mazes. New York: Oxford University Press.
59.
JacobsJerry. 1995. Revolving Doors: Sex Segregation and Women's Careers. Stanford: Stanford University Press.
60.
JacobySanford. 1985. Employing Bureaucracy: Managers, Unions, and the Transformation of Work in American Industry, 1900–1945. New York: Columbia University Press.
61.
JacobySanford. 1990. “The New Institutionalism: What Can it Learn from the Old?”Industrial Relations, Vol. 29, No. 2, pp. 316–40.
62.
KanterRosabeth Moss. 1977. Men and Women of the Corporation. New York: Basic Books.
63.
KatzHarryDarbishireOwen. 1999. Converging Divergences. Ithaca: Cornell University Press.
64.
KatzHarryDarbishireOwen. 1985. Shifting Gears: Changing Labor Relations in the American Automobile Industry. Cambridge: MIT Press.
65.
KaufmanBruce. 1994. “The Evolution of Thought on the Competitive Nature of Labor Markets.” In KerrClarkStaudoharPaul, eds., Labor Economics and Industrial Relations, pp. 145–88. Cambridge: MA: Harvard University Press.
66.
KaufmanBruce. 2004. “The Institutional and Neoclassical Schools in Labor Economics.” In ChamplinDellKnoedlerJanet, eds., pp. 13–38. The Institutionalist Tradition in Labor Economics. New York: Sharp.
67.
KaufmanBruce. 2006. “Industrial Relations and Labor Institutionalism: A Century of Boom and Bust.”Labor History, Vol. 47, No. 3, pp. 295–318.
68.
KaufmanBruce. 2007. “The Institutional Economics of John R. Commons: Complement and Substitute for Neoclassical Economic Theory.”Socio-Economic Review, Vol. 5, No. 1, pp. 3–46.
69.
KaufmanBruce. 2008. Managing the Human Factor. Ithaca: Cornell University Press.
70.
KaufmanBruce. 2008. “The Non-Existence of the Labor Demand/Supply Diagram, and Other Theorems of Institutional Economics.”Journal of Labor Research, Vol. 29, pp. 285–99.
71.
KerrClark. 1954. “The Balkanization of Labor Markets.” In BakkeE. Wright, ed., Labor Mobility and Economic Opportunity, pp. 92–110. Cambridge: MIT Press.
72.
KerrClarkDunlopJohn T.HarbisonFrederick H.MyersCharles A., 1960. Industrialism and Industrial Man. Cambridge: Harvard University Press.
73.
KochanThomasOstermanPaul. 1994. The Mutual Gains Enterprise. Cambridge: Harvard Business School Press.
74.
KochanThomasLansburyRussellMacDuffieJohn-Paul. 1997. Beyond Lean Production. Ithaca: Cornell University Press.
75.
KochanThomasEatonAdrienneMcKersieRobertAdlerPaul. 2009. Healing Together: The Labor-Management Partnership At Kaiser Permanente. Ithaca: Cornell University Press.
76.
LampmanRobertRottenbergSimon. 1956. “On Choice in Labor Markets.”Industrial and Labor Relations Review, Vol. 9, No. 4, pp. 629–43.
77.
LautschBrenda. 2002. “Uncovering And Explaining Variance In The Features and Outcomes of Contingent Work.”Industrial and Labor Relations Review, Vol. 56, No. 1, pp. 23–43.
78.
LazearEdward. 2000. “Performance Pay and Productivity.”American Economic Review, Vol. 90, No 5, pp. 1346–61.
79.
LazearEdward. 2000. “Economic Imperialism.”Quarterly Journal of Economics, Vol. 115, No. 1, pp. 99–146.
80.
LazearEdwardShawKathryn. 2007. “Personnel Economics: The Economist's View of Human Resources.”Journal of Economic Perspectives, Vol. 21, No. 4, pp. 91–114.
81.
LesterRichard. 1946. “The Shortcomings of Marginal Analysis in Wage-Employment Problems.”American Economic Review, Vol. 36, No. 1, pp. 62–82.
82.
LincolnJamesKallebergArne. 1990. Culture, Control, and Commitment: A Study of Work Organization and Work Attitudes in the United States and Japan. New York: Cambridge University Press.
83.
MacDuffieJohn Paul. 1995. “Human Resource Bundles and Manufacturing Performance: Organizational Logic and Flexible Production Systems in the World Auto Industry.”Industrial and Labor Relations Review, Vol. 48, No. 2, pp. 197–221.
84.
MachlupFritz. 1946. “Marginal Analysis and Empirical Research.”American Economic Review, Vol. 36, No 4, pp. 519–54.
85.
MahoneyJames. 2000. “Path Dependence In Historical Sociology.”Theory and Society, Vol. 29, No. 4, pp. 507–548.
86.
MarchJamesSimonHerbert. 1958. Organizations. New York: Wiley.
87.
MarsdenDavid. 1999. A Theory of Employment Systems. London: Oxford University Press.
88.
MarsdenDavidBelfieldRichard. 2008. “Institutions and the Management of Human Resources: Incentive Pay Systems in France and Great Britain.” Mimeo, London School of Economics.
89.
MartinJoanne. 1992. Cultures in Organizations: Three Perspectives. New York: Oxford University Press.
90.
McPhersonMillerSmith-LovinLynnCookJames. 2001. “Birds of A Feather: Homophily in Social Networks.”Annual Review of Sociology, Vol. 27, pp. 451–44.
91.
McNultyPaul J.1980. The Origins And Development of Labor Economics: A Chapter in the History of Social Thought. Cambridge: MIT Press.
92.
MyersCharlesShultzGeorge. 1951. The Dynamics of a Labor Market: A Study of the Impact of Employment Changes on Labor Mobility, Job Satisfactions, and Company and Union Policies. Upper Saddle River, NJ: Prentice-Hall.
93.
NelsenBonalynBarleyStephen. 1997. “For Love or Money? Commodification and the Construction of an Occupational Mandate.”Administrative Science Quarterly, Vol. 42, No. 4, pp. 619–53.
94.
NelsonRichardWinterSidney. 1982. An Evolutionary Theory of Economic Change. Cambridge: Harvard University Press.
95.
OstermanPaul. 1994. “How Common is Workplace Transformation and How Can We Explain Who Adopts it? Evidence From a National Survey.”Industrial and Labor Relations Review, Vol. 47, No. 2, pp. 173–88.
96.
OstermanPaul., 2000. “Work Organization in an Era of Restructuring: Trends in Diffusion and Impacts on Employee Welfare.”Industrial and Labor Relations Review, Vol. 53, No. 2, pp. 179–96.
97.
OstermanPaul. 2009. The Truth About Middle Managers. Cambridge: Harvard Business School Press.
98.
ParsonsKenneth H.1963. “The Basis of Commons' Progressive Approach to Public Policy.” In SomersGerald, ed, Labor Management and Social Policy, pp. 3–24. Madison: University of Wisconsin Press.
99.
PfefferJeffrey. 1998. The Human Equation: Building Profits by Putting People FirstCambridge: Harvard Business School Press.
100.
PfefferJeffrey. 2007. “Human Resources from an Organizational Behavior Perspective: Some Paradoxes Explained.”Journal of Economic Perspectives, Vol. 21, No. 4, pp. 115–34.
101.
PfefferJeffreyCohenYinon. 1984. “Determinants of Internal Labor Markets in Organizations.”Administrative Science Quarterly, Vol. 29, No. 4, pp. 550–72.
102.
PiersonFrank, ed. 1957. New Concepts in Wage Determination. New York: McGraw Hill.
103.
PilFrits K.MacDuffieJohn-Paul. 1996. “The Adoption of High Involvement Work Practices.”Industrial Relations, Vol. 35, No. 3, pp. 423–55.
104.
PioreMichaelSaffordSean. 2006. “Preliminary Thoughts on Identity and Segmentation in Primary Labor Markets.” Paper presented to the SASE Conference, Trier, Germany, 30 June-2 July.
105.
PrendergastCanice. 1999. “The Provision of Incentives in Firms.”Journal of Economic Literature, Vol. 37, No. 1, pp. 7–63.
106.
RoyDonald. 1959. “Banana Time: Job Satisfaction and Informal Interaction.”Human Organization, Vol. 18, No 4, pp. 158–68.
107.
RubinsteinSaul A.KochanThomas. 2001. Saturn: Possibilities For Corporate Governance and Employee Relations. Ithaca, NY: ILR Press (an imprint of Cornell University Press).
108.
ThelenKathleen. 2004. How Institutions Evolve: The Political Economy of Skills in Germany, Britain, the United States, and Japan. New York: Cambridge University Press.
109.
ReynoldsLloyd. 1951. The Structure of Labor Markets: Wages and Labor Mobility in Theory and Practice. West-port: Greenwood Press.
110.
RobertsJohn. 2004. The Modern Firm: Organizational Design For Performance and Growth. New York: Oxford University Press.
111.
RossArthur. 1948. Trade Union Wage Policy. Berkeley: University of California Press.
112.
RoyDonald. 1954. “Efficiency and ‘The Fix’: Informal Intergroup Relations in a Piecework Machine Shop.”American Journal of Sociology, Vol. 60, No. 3, pp. 255–66.
113.
ScottW. RichardDavisGerald F., 2003. Organizations and Organizing-Rational, Natural, and Open System Perspectives. Upper Saddle River, NJ: Prentice Hall.
114.
ScullyMaureenSegalAmy. 2002. “Passion with an Umbrella: Grassroots Activists and the Workplace.” In LounsburyMichaelVentrescaMarc J., eds., Research in the Sociology of Organizations, Vol. 19: Social Structure and Organizations Revisited, pp. 125–68. Emerald Business, Management and Economics eBook Series.
115.
SeashoreStanley. 1954. Group Cohesiveness In The Industrial Workgroup. Ann Arbor: University of Michigan Survey Research Center.
116.
SelznickPhillip. 1949. TVA and the Grassroots: A Study of Politics and Organization. Berkeley: University of California Press.
117.
SolowRobert. 1990. The Labor Market as a Social Institution. Cambridge: Blackwell.
118.
StinchcombeArthur. 1965. “Social Structure and Organizations.” In MarchJames, ed. Handbook of Organizations, pp. 142–93. Chicago: Rand McNally.
119.
SuttonJohnDobbinFrankMeyerJ.ScottW.R., 1994. “The Legalization of the Workplace.”American Journal of Sociology, Vol. 99, No. 4, pp. 944–71.
120.
WaltonRichardCutcher-GershenfeldJoelMcKersieRobert. 1994. Strategic Negotiations: A Theory of Change In Labor Management Relations. Cambridge: Harvard Business School Press.
121.
WilliamsonOliver. 1975. Markets and Hierarchies: Analysis and Antitrust Implications. New York: Free Press.
122.
WomackJamesJonesDaniel T.RoosDaniel. 2007. The Machine That Changed the World, the Story of Lean Production, Toyota's Secret Weapon in the Global Car Wars. New York: Free Press.
123.
ZaldMayerBergerMichael. 1978. “Social Movements in Organizations: Coup d'Etat, Insurgency, and Mass Movements.”American Journal of Sociology, Vol. 83, No. 4, pp. 823–61.
