Competing for Talent : Firms, Managers and Social Networks

Do social networks help or hinder firms recruiting talented managers? In our setting, firms are randomly connected to prospective young managers through former employees. Under a discrete-choice model, we find networks increase the likelihood firms hire high-ability managers, while having no effect on the hiring rate of low-ability managers. Effects are greatest for nonlocal firms, strong ties, and peers living in the same neighborhood. Survey evidence suggests social networks promote recruitment by providing information about firm fundamentals to potential applicants. Overall, we find networks improve managerial recruitment outcomes by increasing access to scarce talent