Recruitment Sources and Retention Outcomes in Domestic and Foreign‐Owned Firms in Japan: A Human Capital Perspective

ABSTRACT While recruiting and retention are core human resource management functions, little attention has been given to their contextual differences in domestic and foreign‐owned firms. We draw on human capital theory and used a mixed‐methods approach—(1) time‐lagged surveys with 755 employees and (2) semi‐structured interviews with 110 managers, headhunters, and employees—to examine recruiting and turnover in domestic and foreign‐owned firms in Japan. Our findings demonstrate significant differences in recruiting sources and turnover‐related outcomes between these firms, partly due to the more extensive use of headhunters and recruitment of host country national employees with higher general human capital in foreign‐owned firms. Our arguments and empirical evidence contribute to the literature by challenging the assumptions of human capital theory, emphasizing the role of context, and providing insights into the underlying reasons for turnover differences between domestic and foreign‐owned firms.