External Recruitment and Intrafirm Mobility

Abstract:     
In Chan (1996), I suggest that a contest between internal and external candidates for a position within a firm is generally biased in favor of the former to maintain work incentive for existing workers. This implies that a successful external candidate tends to be superior in ability relative to internally promoted colleagues and therefore enjoys a higher probability of subsequent promotion. Moreover, this effect tends to diminish up the hierarchy if external competition is more of a threat at lower job levels. Analyzing personnel data from a U.S. financial corporation, I find consistent support for this hypothesis.

Number of Pages in PDF File: 16

JEL Classification: J00, J41

Accepted Paper Series