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Internships are a growing, yet controversial, labour market phenomenon. In particular, the issue of unpaid internships has been the source of legislative, judicial and ethical debate. Some have criticised colleges and universities for promoting an expansion of internships for undergraduate students – with little regard for internship characteristics such as compensation, quality of supervision and work activities. Meanwhile, there is a paucity of research examining the role internship characteristics, such as compensation, supervisor behaviours and work design have on internship efficacy. Based on a survey of undergraduate students in the US, the results showed that supervisor mentoring, the developmental value of the internship and the job pursuit intentions of the intern with the host employer were lower for those reporting on their unpaid internship vs. paid internship. Meanwhile, supervisor support and supervisor mentoring are significant predictors of internship efficacy regardless of internship compensation, while work design has much less of an impact on internship efficacy. The implications of the findings for educators, employers and prospective interns are highlighted. [ABSTRACT FROM PUBLISHER]