Attracting and retaining core competency: a focus on cost stickiness

Abstract

Purpose This paper aims to investigate whether firms strategically use retirement plans to retain employees with core competencies and whether offering these retirement plans provides competitive advantages that lead to greater profitability. Design/methodology/approach The data set consists of annual financial data reported to the US Department of Transportation by long haul truckload carriers. The paper uses linear regression analysis to test the hypotheses. Descriptive statistics, univariate comparisons and robustness tests are also reported. Findings The findings support the assertion that offering a retirement plan is positively related to the attraction and retention of skilled workers and that firms that offer retirement plans are more profitable. Research limitations/implications Data limitations preclude proving a definitive causal relationship. With the increasing availability of rich and timely data sets at both the firm and employee levels, future research may enhance the understanding of the role that pensions play in both labor and firm productivity. Originality/value This study provides evidence that retirement plans may serve as a strategic tool in highly competitive industries characterized by high labor turnover. This study shows that by analyzing the degree of cost stickiness in income statement line-items, it is possible to bypass the need for more granular analyses to uncover meaningful economic relationships. Finally, this study contributes to the literature examining the implications of operating decisions for financial performance (a balanced scorecard perspective), and it shows that offering pension benefits is related to stronger financial performance.