Training Investment and Screening on Employee Attributes: A Complementarity View

Abstract

We examine how investments in training and employee selection interact to address the control problem of establishing a productive and stable relationship between employees and firms. Taking a complementarity theory perspective, we show that firms that invest highly in training also invest highly in employee selection processes and vice versa. We propose that specific employee attributes (i.e., stability and trainability) enhance the returns to training and are thus demanded and screened for by firms when committing resources to training. In turn, when firms invest in costly employee selection processes to screen for these attributes, investing in training further improves the productivity and stability of the employee-firm relationship. Examining the boundary conditions of this interdependence, we find that the complementarity between investments in training and that in screening for stability of employees increases in the creativity dependence of a firm.