Why do firms opt for internal labor markets when they may be able to find more candidates with necessary qualifications outside?

In a firm where team production prevails and employer-specific human capital is important, the classification of workers into job slots reduces the costs of evaluating productivity and adjusting pay. Such a firm may choose to promote persons through an internal labor market rather than considering outside candidates. An internal labor market facilitates comparisons between candidates for a promotion. Unlike outside applicants, their on-the-job conduct can be easily observed and their records are kept as part of ordinary company business.