Study of Externalization in Organizations: Examining the Determinants of Using Workers Not On Payroll

In this thesis, I examine the determinants of the likelihood and the intensity of using externalized workers in organizations. Drawing on 1996-1997 National Organizations Survey (NOS ̏), I study the use of externalized workers from five theoretical perspectives: numerical flexibility, dual workforce, organization transformation, matching efficiency, and internal labor market (ILM) screening flexibility. It is found that different factors affecting the odds of using externalized workers and the degree an organization may externalize its workforce. These two processes appear to be independent to some degree. The organization transformation perspective is the one that is most strongly supported by the results, which suggests organizations' desire to externalize for structural flexibility. Another finding is that Organizations use externalized workers to screen qualified workers for permanent organizations, which reduces the turnover and instability of an organization. It supports the compatibility of ILMs and externalization.