Starstruck: How Hiring High-Status Employees Affects Incumbents’ Performance

Matteo Prato () and Fabrizio Ferraro ()
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Matteo Prato: Institute of Management and Organization, Università della Svizzera italiana, 6900 Lugano, Switzerland
Fabrizio Ferraro: Department of Strategic Management, IESE Business School, 08022 Barcelona, Spain

Organization Science, 2018, vol. 29, issue 5, 755-774

Abstract: This study investigates the effects of high-status inbound mobility on the performance of incumbents. Leveraging sociological theory on status, we suggest that high-status newcomers generate only limited knowledge spillovers compared to the resources they drain from incumbents. Building on this mechanism, we formulate our first hypothesis that hiring stars negatively affects incumbents’ performance. We argue that this effect is asymmetric across incumbents. Because high-status incumbents can better cope with the shock in the internal allocation of resources produced by high-status newcomers, we expect that they will experience a lower performance decline than low-status incumbents. We test our hypotheses by studying the change in recommendation profitability of incumbent securities analysts experiencing inbound mobility events in the period 1996–2007. Our results show that the higher the status of the hired analyst, as captured by the Institutional Investor ranking history, the greater the decline in the incumbent analyst’s recommendation profitability, and that this decline is moderated by the status of the incumbent analyst.

Keywords: employee mobility; social status; organizational resources; individual performance (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ororsc:v:29:y:2018:i:5:p:755-774

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