Enterprises can gain competitive advantage by increasing employee skills. Yet, mainstream theory suggests that they are reluctant to engage in training because of market failures. Together with administrative failures in national training systems, this can lead to an economy-wide under-provision of skills. Tightly co-ordinated labour markets that encourage firms to engage in training are widely seen as a solution to this problem. But the exemplars of co-ordinated labour markets, Germany and Japan, have performed poorly in recent years, casting a shadow over this view. Thus, a gap is emerging between theory and practice. Accentuating this gap are developments in skill formation activity in so-called non-co-ordinated economies like Britain, Australia and the USA. In these countries there has been a decisive shift towards a competence-based model of skill formation. This competence-based model challenges some of the core assumptions underpinning the traditional 'free-riding' view of enterprise training strategies. On the one hand, it suggests that firms are usually more willing to engage in training voluntarily than is often assumed. On the other hand, wider labour market coordination is still considered important for skill formation, not to create institutional incentives or penalties but to address information and signalling failures in employment systems. Thus, developments on the ground are encouraging a reappraisal of the standard view of firm-level skill formation activity. We test some of the thinking behind the competence-based view of skill with original survey data on in-company training in three sectors of the Irish economy. The empirical evidence confirms high levels of training activity, and also confirms that companies tend to embed training in an integrated package of human resource measures for maximum effect.
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