Why Are Quit Rates Lower Among Defense Contractors?




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    • The authors’ affiliation is College of Business and Economics, Lehigh University, Rauch Business Center, Bethlehem, PA. E-mail: taw4@lehigh.edu; tjh7@lehigh.edu. This paper was first drafted while Watkins was a Visiting Scholar in the Department of Economics, National University of Ireland, Galway, whose support is gratefully acknowledged. The authors also sincerely thank Antonio J. Gallardo, who collected the survey data used in this paper for his doctoral dissertation, advised by the authors, and Michael Metcalf, who provided remarkably able research assistance. Financial assistance for data collection came from the Small Business Development Center and the Martindale Center for the Study of Private Enterprise, both at Lehigh University.


This paper presents empirical evidence of lower quit rates at small manufacturers with defense contracts and examines whether this is associated with differences in their human resource policies and organizational practices and strategies. We take advantage of an original data set to compare labor quits, workforce skills, and occupational structure between defense-contracting and noncontracting small manufacturers in eastern Pennsylvania. We find that the remarkably large defense contractor advantage in quit rates—7 percentage points—is almost totally explained by differences in skills, operational strategies, and workforce management and training practices, suggesting a mediation effect through these HR practices. Defense-contracting status emerges as an important overlooked variable in HRM studies.