Integrating the internal and external labour markets

Evidence of shifts towards atomised relations in the labour market appears to conflict with economic theories of the internal labour market. The problem, however, lies not with the irrelevance of internal labour market systems and broader institutional structures, but rather with the misspecification of theoretical analysis. New institutional and labour market segmentation models are typically restricted to a static, dualistic framework of comparative forms of work organisation. This paper outlines a dynamic approach to the study of internal labour markets. We argue that internal and external competitive pressures mutually interact to shape employer strategy and the relative labour market positions of employees.