Poaching and Firm‐Sponsored Training
| Published date | 01 March 2019 |
| Date | 01 March 2019 |
| DOI | http://doi.org/10.1111/bjir.12305 |
British Journal of Industrial Relations doi: 10.1111/bjir.12305
57:1 March 2019 0007–1080 pp. 143–181
Poaching and Firm-Sponsored Training
Jens Mohrenweiser, Thomas Zwick
and Uschi Backes-Gellner
Abstract
A series of seminal papers argues that poaching hampers company-sponsored
general training. Empirically, however, the existence and extent of poaching
remain open questions. We provide a novel empirical strategy to identify
poaching. We find that only few apprenticeship training firms in Germany
are ‘poaching victims’ or ‘poaching raiders’. Victims are more likely to be
in a temporary downturn and raiders are more likely to be growing. Victims
hardly change their training strategy after poaching and poaching seems be a
transitory event.This is an important result for countries that intend to introduce
apprenticeship-type training and need to convincefirms to participate in training.
1. Introduction
Employer investments in transferable skills such as apprenticeship training
are widely viewed by economists as a riskystrategy because outside firms can
poach trained employees and the training firm loses its training investment.1
The raiding firm can meet its skill demand without paying for training.
Consequently, poaching and the threat of poaching can lead to lower-than-
ecient training investments by firms (Acemoglu and Pischke 1999a, 1999b;
Leuven 2005; Stevens 1996).
Despite the poaching risk, employers oer apprenticeship training in
Germany. The German labour market is considered a prime example of
occupational type labour markets in which apprenticeships underpin a
high standardization of transferable skills (Gospel 1998; Lewis et al. 2008;
Marsden 2016; Marsden and Ryan 1990). Apprenticeship certificates issued
by credible external institutions reveal the value of transferable skills to
outside employers and facilitate firm switches (Busemeyer 2009; Soskice
1994). However, apprenticeships,particularly in manufacturing, also entail net
Jens Mohrenweiser is at Bournemouth University, UK. Thomas Zwick is at the University of
W¨
urzburg, Germany, ZEW Mannheim, Germany and ROA Maastricht, Netherlands. Uschi
Backes-Gellner is at the University of Zurich, Switzerland.
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2018 John Wiley& Sons Ltd.
144 British Journal of Industrial Relations
training investments by companies (Carlin and Soskice 2009; Mohrenweiser
and Zwick 2009; Sch¨
onfeld et al. 2010; Wenzelmann 2012).
The theoretical literature solves this economic puzzle of firms investing
in general training despite the risk of poaching by distinguishing two
mechanisms that might prevent or reduce the poaching risk. First, training
investments are possible if the post-training monopsony power of training
firms generates wage compression (Acemoglu and Pischke 1999a; Booth
and Zoega 2004; Leuven 2005; Soskice 1993; Wolter and Ryan 2011).
Second, employer coordination can solvethe issue of commitment to training
and reduce free-riding through circulation of information, deliberation,
monitoring and sanctioning (Busemeyer 2009; Culpepper 1999; Soskice 1994).
Despite these institutional and labour market particularities, the empirical
existence, the extent, the determinants and the consequences of poaching
remain open empirical questions.
The main reason for the lack of evidence on poaching is the diculty
to empirically identify poached trainees. The identification requires that the
training firm wants to retain the training participant and that an outside firm
is willing to pay a higher salary than the training firm.
We introduce a novel approach to solve these empirical challenges.
We identify poached training participants by exploiting earnings variance
between apprenticeship completers2in the German apprenticeship training
system. We argue that ‘the training firm wants to retain an apprenticeship
completer’ if it pays more at the end of the apprenticeshipfor this person than
for his or her peers (‘interest to keep’).We argue that‘the outside fir m poaches’
if a leaving apprenticeship completer earns more at the new firm than any
of the retained apprenticeship completers of the cohort in the training firm
(‘earnings mark-up’).
The first condition relies on two assumptions: first, the training firm learns
the productivity of apprentices during apprenticeship in contrast to outside
firms. Second, the training firm is more interested in keeping the more
productive apprenticesand that therefore the more productive apprenticesget
a higher pay than their peers (apprentices in the same occupationand cohort).
The second condition relies on the assumption that the maximum a training
firm is willing to pay to retain an apprentice is equal to the highest actual
amount the training firm pays for its apprenticeship completers.
Our empirical analysis identifies training firms that have been poaching
victims and shows that poaching is more likelyto be a transitory rather than a
systematic event. Poaching and raiding firms are relatively large and payhigh
wages while smaller firms are ableto retain apprenticeship completers despite
paying lowerwages. Poaching victims are neverthelessvulnerable because they
experience a temporary employment decline. During a downsizing period,
training firms may not be able to make counter-oers for apprenticeship
completers they want to retain. Workforce reductions indicate for outside
firms, that they can hire high-quality employees relatively cheaply. Thus,
raiding firms exploit temporary weaknesses of training firms and get well-
trained apprenticeship completers they would otherwise not have been able to
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2018 John Wiley& Sons Ltd.
Poaching and Firm-Sponsored Training 145
attract. Raiding firms,on the contrary, typically experience a period of strong
employment growth and also train their own apprentices. The analysis of the
consequences of poaching supports the argument that poaching is transitory.
Poaching victims neither adjust the proportionof training places nor earnings
for apprenticeship completers in their first jobs as skilled employees.
We conclude that the poaching risk is low and poaching is mainly a
transitory event without severe long-term consequences for apprenticeship
training firms. Hence, poaching does not undermine the apprenticeship
training system in Germany.
The remainder of this paper is organizedas follows:The next section reviews
the literature. The third and fourth section briefly describes the institutional
setting of apprenticeship training in Germany and the data. Afterwards,
we present our identification strategy for poached apprentices and describe
firms that are poaching victims in comparison with raiding firms and firms
not aected by poaching. The seventh section analyses firms’ responses to
poaching. The last sections discuss consequences for apprenticeship training
and conclude.
2. Background discussions
Theoretical Background
A long tradition of theoretical papers analyses firms’ incentives to invest
in general skills of employees. The main argument is that labour market
imperfections create a wedge between employees’ post-training productivity
and wages, which allows firms to get a return on training investments.3
However, firms can lose a minority of trainees and outside firms can earn a
‘rent’ on these trainees as long as staying trainees compensate for training
investments (Acemoglu and Pischke 1999a, 1999b; Booth and Zoega 2004;
Leuven 2005; Stevens 1994). Transitory poaching and company investments
in general skills can co-exist in equilibrium: firms expect that they cannot keep
all trainees they would like to keep and that some training participants might
be poached by outside firms. Training firms nevertheless invest in training
because they obtain rents from training as long as the retention probability is
high or the poaching probabilityremains small. Market imperfections prevent
systematic poaching. For example Acemoglu and Pischke (1998) have shown
that information asymmetry on the ability of apprentices between potential
raider and training firms and the possibility of counter-oers4by training
firms leads to the risk of a ‘winners´curse’ for successful poaching firms that
prevent firms from systematic poaching attempts.
The transferability of acquired skills between firms and the visibility
of skills for outside firms determines the probability of an outside oer
and, hence, poaching (Lazear 1986; Stevens, 1996, 2001). Poaching can in
principle be prevented if the future employment of the trained employee
is ex ante contractible or if reimbursement of training costs is possible
(Benson et al. 2004; Manchester 2012). In addition, high transferability and
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2018 John Wiley& Sons Ltd.
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