Human capital and institutional determinants of information technology compensation: Modeling multilevel and cross-level interactions

Compensation is critical in attracting and retaining information technology (IT) professionals. However, there has been very little research on IT compensation. Juxtaposing theories of compensation that focus on human capital endowments and labor market segmentation, we hypothesize multilevel and cross-level determinants of compensation. We use hierarchical linear modeling to analyze archival salary data for 1,576 IT professionals across 39 institutions. Results indicate that compensation is directly determined by human capital endowments of education and experience. Institutional differentials do not directly drive compensation, but instead moderate the relationship of human capital endowments to compensation. Large institutions pay more than small institutions to IT professionals with more education, while small institutions pay more than large institutions to IT professionals with less education. Not-for-profit institutions pay more than for-profits to IT professionals with more or IT-specific education. Further, information-intensive institutions pay more than noninformation-intensive institutions to IT professionals with more or IT-specific education. We interpret these results in the context of institutional rigidity, core competencies, and labor shortages in the IT labor market.