Professional networks and their coevolution with executive careers: Evidence from North America and Europe

Nicoletta Berardi, Marie Lalanne and Paul Seabright

No 243, SAFE Working Paper Series from Leibniz Institute for Financial Research SAFE

Abstract: This paper examines how networks of professional contacts contribute to the development of the careers of executives of North American and European companies. We build a dynamic model of career progression in which career moves may both depend upon existing networks and contribute to the development of future networks. We test the theory on an original dataset of nearly 73 000 executives in over 10 000 firms. In principle professional networks could be relevant both because they are rewarded by the employer and because they facilitate job mobility. Our econometric analysis suggests that, although there is a substantial positive correlation between network size and executive compensation, with an elasticity of around 20%, almost all of this is due to unobserved individual characteristics. The true causal impact of networks on compensation is closer to an elasticity of 1 or 2% on average, all of this due to enhanced probability of moving to a higher-paid job. And there appear to be strongly diminishing returns to network size.

Keywords: professional networks; labor mobility; executive compensation (search for similar items in EconPapers)
JEL-codes: D85 J31 J62 M12 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-lab, nep-net, nep-sbm and nep-soc
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:safewp:243

DOI: 10.2139/ssrn.3329152

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