Investing in talent development: Theory and applications

This paper examines contractual arrangements in employment settings in which employers have to invest in development of employees, and the benefits of that training are at least partially transferrable to rival employers. The problem is how to incentivize firms to make the necessary investments when...

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Bibliographic Details
Published in:Managerial and decision economics 2022-09, Vol.43 (6), p.1641-1650
Main Author: Miceli, Thomas J.
Format: Article
Language:English
Subjects:
Ability
Baseball
Employment
Finance
Self financing
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Summary:This paper examines contractual arrangements in employment settings in which employers have to invest in development of employees, and the benefits of that training are at least partially transferrable to rival employers. The problem is how to incentivize firms to make the necessary investments when employees cannot self‐finance due to liquidity constraints and/or a low probability of success. Applications of the model include rules that once governed employment relations in major league baseball and Hollywood filmmaking, and noncompete clauses that limit the outside options of departing employees. The conclusions are also applied to the problem of financing of college costs.
ISSN:0143-6570
1099-1468
DOI:10.1002/mde.3530