Human Resource Flow and Software Firm Performance: The Role of Direct vs. Indirect Competitors

Abstract

Recent years have witnessed increasingly stiff competition for talents among software firms. The economic impact of obtaining workers from or losing workers to competing firms, however, has rarely been quantified. Built on the literature of human resource flow and firm competition, this study examines the impact of human resource flows from and to different types of competitors on company performance. In particular, we divide competitors into direct and indirect competitors according to their market and resource similarity. Using a large dataset on labour mobility derived from LinkedIn.com, we quantify the impact of employees who came from or joined direct and indirect competitors respectively. We find that employees from competitors bring great benefits to the recipient firms. Specifically, a 1 percent increase of the number of employees from direct (indirect) competitors that join the focal company in the previous year increases the company’s economic value added by 0.054 (0.074) percent in the current year. Our results also contribute to the existing literature on human resources and company strategy and provide practical implications to recruiters and policy makers in the software industry.