Network Hiring, Firm Performance and Growth

41 Pages Posted: 13 Apr 2020

See all articles by Ines Black

Ines Black

Duke University - Fuqua School of Business

Sharique Hasan

Duke University - Fuqua School of Business

Date Written: April 9, 2020

Abstract

Network hiring — i.e. the preference for hiring workers who are referred by existing employees or have shared affiliations with them — is a prevalent practice across many industries. Considerable research shows that hiring within a firm's network provides soft information about potential hires as well as informal mechanisms of control once they join a company. While research shows that in-network hires perform better, little is known about the firm-level performance implications and the associated trade-offs of this practice. In this article, we study the impact of network hiring by using data on the universe of firms in Portugal between 1994 to 2017. We find that network hiring appears to increase firm performance but at the expense of growth. Furthermore, network hiring seems to provide firms with information on intrinsic motivation traits of the candidates, rather than information on skills. We conclude with a discussion on how this practice should affect the strategy of firms, particularly young ones.

Keywords: Hiring, Networks, Referrals, Strategy

Suggested Citation

Black, Ines and Hasan, Sharique, Network Hiring, Firm Performance and Growth (April 9, 2020). Available at SSRN: https://ssrn.com/abstract=3571281 or http://dx.doi.org/10.2139/ssrn.3571281

Ines Black

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States

Sharique Hasan (Contact Author)

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States

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