Frank Linnehan and Donna De Carolis
In Strategic Management Journal, 26, pp.523-539 (2005).
Find the article here.
School-to-work programmes (STW) developed in the US out of the belief that the educational system was inadequately preparing students for the world of work. STW programmes are predicated on the engagement of employers in educational activities, and yet few studies have analysed STW programmes from the perspective of businesses and other enterprises. Previous research has suggested that economic concerns over the efficacy of school preparation in terms of student work-related skills have driven company desires to engage with school-to-work activities and that this has guided US policy. This article examines the impetuses of private enterprises for participating with STW programmes, specifically looking at transaction cost economics (TCE) and resource-based view (RBV) as theorised motivating factors.
TCE considers economic exchanges between two parties, with firms aiming to find the most efficient method of exchange. TCE proposes that organisations engage with STW programmes on the basis that the education system is not providing adequate entry-level employees, which is raising the cost of firm procedures (e.g. recruitment and training). Therefore, firms must act in the self-interested TCE model to foster links with schools, so that their students are better prepared for working within their organisations.
RBV argues that firms are in competition based upon the availability and accessibility of resources: firms will seek to build their human resources in order to develop a competitive advantage. RBV theory suggests that organisations are motivated to participate with STW programmes on the basis that they can provide an advantage in securing applicants, and thus human capital, for the firm. STW programmes provide the opportunity for firms to assess individuals and establish relationships for potential future employees. Thus, STW programmes offer a relatively inexpensive method of acquiring gains in human capital.
The authors draw upon data from the 1997 National Employer Survey (NES), which explored employer participation in 20 different school-to-work activities. In total there were 4,100 completed telephone surveys – a 59% response rate. To assess the impacts of TCE and RBV different variables were considered and tested through regression analysis. TCE variables: average time to fill a position (transaction uncertainty), the percentage of new hires at lower levels (frequency) and the percentage of employees in self-management teams (opportunism). RBV variables: log of the establishment’s total assets that are less than 4 years old (inimitable asset stock) and the benchmarking measure (asset reconfiguration). Common variables between both TCE and RBV: training, quality of school graduates, increase in skill level requirements. The following control variables were also considered: company size, manufacturing establishment, presence of high-performance work systems, contingent employees and turnover.
Results established a significant, positive relationship between school-to-work activity levels and evaluation of how well prepared graduates were for employment. School-to-work activities increased within organisations that recognised students as highly prepared for the workplace. The supposed quality of labour was positive and significant within the statistical models, meaning that firms are more likely to engage with STW when potential labour sources are of a high quality. These results are consistent with the RBV framework, that firms are more likely to invest in STW programmes when they are likely to generate a return from high levels of human capital, where the students are perceived as well-prepared for work. Organisations are much more likely to engage when they witness a competitive advantage in sourcing human capital from STW programmes. The authors argue that this finding disproves the hypothesis that firms are motivated by TCE to engage with school-to-work activities.
Results also demonstrated a positive relationship between school-to-work activities and on-the-job training and learning. This suggests that STW programmes work alongside training schemes to improve the assets and resources of organisations. There was also a positive and significant relation between changing skills and the intensity of school-to-work activities. This implies that firms are keen to uncover and develop labour sources to cater to changing levels of skills necessary to adapt and compete within the labour market. STW programmes can offer a means for firms to remain competitive and up-to-date with current practice by providing a supply of human capital.
These findings suggest that school-to-work activities are a source of long-term value creating for firms. For the education system, the benefits are witnessed in the progression of graduates into training or employment.
The authors find the implications of these results to be pertinent for US policy at the time of publication (2005). They suggest that policy should recognise that businesses seek to be involved with STW programmes as a method of developing their human capital resources, not to enhance the quality of education. Firms are motivated by the potential to enhance their competitive advantage, in line with the RBV strategic framework. This implies that fruitful STW programmes are fostered under periods of successful education, rather than the policy perception of educational system failure driving a need for school-to-work activity.
The authors acknowledge that these results could be strengthened by longitudinal data.