Human Capital and Careers in Organizations: Theory and Evidence
Friday, Jan. 4, 2019 8:00 AM - 10:00 AM
- Chair: Kathryn Shaw, Stanford University
Working Hours and Top Management Appointments: Evidence from Linked Employer-Employee Data
AbstractBy combining Danish registry data covering the population of Danish workers with the Danish Labor Force Survey (DLFS) which provides detailed data on working hours, we provide fresh evidence and insights on a potentially important role that future career considerations play in accounting for the incidence of long working hours. First, we obtain new and robust evidence with external validity on a positive association between working hours and subsequent career success (measured by top management appointments). Second, we illuminate that the observed positive association between working hours and career success is consistent with three distinct theories: (i) human capital/job assignment; (ii) rat race; and (iii) tournament. Third, guided by each theory, we go beyond a simple association between working hours and career success, and explore the nature of the hours-career link and shed new lights on possible mechanisms behind the link. Specifically we find that: (i) working long hours tend to be associated with higher odds of top management appointments through internal promotion as well as through external recruitment yet the benefit of long working hours for career success is considerably greater for internal promotion than for external recruitment; (ii) being the longest working hour person among the peers is associated with higher odds of top management appointments and this is true even if actual hours are controlled for; (iii) working nonstandard hours (evening/night) is beneficial for career advancement; and (iv) workers with higher desired hours have greater odds of top management appointments. We interpret each finding from the three theoretical perspectives.
Internal and External Hiring: The Role of Prior Work History
AbstractOne of the most important decisions employers regularly face when filling job vacancies is whether to hire from the inside or recruit externally. Empirical investigations of this subject have been challenged by data limitations. The best data for questions surrounding hiring are often personnel records, but such data typically lack important information on what external hires were doing before they entered the firm and began appearing in the personnel records. In particular, information about their prior work histories provides crucial information to employers that tends to be unobservable to researchers working with such data. Other problems with personnel records is that analysis samples are narrow (e.g., often restricted to a single firm), and it is unclear to what extent results can be generalized.
Using a large, linked, employer-employee panel data set from Finland, we examine the role of work history as a determinant of internal-versus-external hiring decisions. The data allow construction of detailed work histories. Moreover, measures of (job-specific) individual workers performance are inferred from annual bonuses and found to match well the empirical properties of actual worker performance ratings from other data sets. Results show that workers who are externally hired into a given position typically held the same job in their previous firm. External hires also have stronger observable indicators of ability in terms of prior career success. Compared to internally promoted workers, external horizontal transfers have stronger work histories but weaker job performance in the year preceding the transfer.
Firm-Specificity of Asset, Managerial Capability, and Labor Market Competition
AbstractWe develop a model that captures the link between specificity of a firm's asset and capability of the firm's top management, two important sources of profitability. It contributes to strands of economics and management literature by proposing a logic through which firm-specificity and heterogeneity are determined endogenously through labor market competition. Higher importance of managerial capability raises labor mobility, which reduces firm-specificity of asset and human capital, and firm size, whereas higher importance of asset specificity yields opposite effects. We discuss how our model results can enrich a prediction of transaction cost economics on the relationship between uncertainty and governance structure. Also, we discuss implications of our model in the contexts of cross-stage comparisons within an industry's life-cycle and cross-country differences.
- M5 - Personnel Economics