Professional Networks and their Coevolution with Executive Careers: Evidence from North America and Europe

54 Pages Posted: 5 Feb 2019 Last revised: 29 Mar 2019

See all articles by Nicoletta Berardi

Nicoletta Berardi

Banque de France - Economic Study and Research Division

Marie Lalanne

Goethe University Frankfurt - Research Center SAFE

Paul Seabright

University of Toulouse I - Industrial Economic Institute (IDEI); Centre for Economic Policy Research (CEPR)

Date Written: February 4, 2019

Abstract

This paper examines how networks of professional contacts contribute to the development of the careers of executives of North American and European companies. We build a dynamic model of career progression in which career moves may both depend upon existing networks and contribute to the development of future networks. We test the theory on an original dataset of nearly 73 000 executives in over 10 000 firms. In principle professional networks could be relevant both because they are rewarded by the employer and because they facilitate job mobility. Our econometric analysis suggests that, although there is a substantial positive correlation between network size and executive compensation, with an elasticity of around 20%, almost all of this is due to unobserved individual characteristics. The true causal impact of networks on compensation is closer to an elasticity of 1 or 2% on average, all of this due to enhanced probability of moving to a higher-paid job. And there appear to be strongly diminishing returns to network size.

Keywords: professional networks, labor mobility, executive compensation

JEL Classification: D85, J31, J62, M12

Suggested Citation

Berardi, Nicoletta and Lalanne, Marie and Seabright, Paul, Professional Networks and their Coevolution with Executive Careers: Evidence from North America and Europe (February 4, 2019). SAFE Working Paper No. 243, 2019. Available at SSRN: https://ssrn.com/abstract=3329152 or http://dx.doi.org/10.2139/ssrn.3329152

Nicoletta Berardi

Banque de France - Economic Study and Research Division ( email )

31, rue Croix des Petits Champs
75049 Paris Cedex 01
FRANCE

Marie Lalanne (Contact Author)

Goethe University Frankfurt - Research Center SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

Paul Seabright

University of Toulouse I - Industrial Economic Institute (IDEI) ( email )

Manufacture des Tabacs
21 Allee de Brienne bat. F
Toulouse Cedex, F-31000
France
+33 5 61 12 86 17 (Phone)
+33 5 61 12 86 37 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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