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External Recruitment versus Internal Promotion

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Author Info
Chan, William
Abstract

This article analyzes the choice between internal promotion and external recruitment within the framework of an economic contest. Opening up the competition for a position to external candidates reduces the chance of promotion for existing workers and, therefore, their incentive to work. Increasing the prize for winning can maintain incentives but is limited by moral hazard and potentially disruptive office politics. Alternatively, a competitive handicap can be awarded to existing workers to boost their chances. This strategy is consistent with the general observation that an external candidate is recruited only if she is significantly superior to the internal contestants. Copyright 1996 by University of Chicago Press.

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File URL: http://links.jstor.org/sici?sici=0734-306X%28199610%2914%3A4%3C555%3AERVIP%3E2.0.CO%3B2-F&origin=repec
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Publisher Info
Article provided by University of Chicago Press in its journal Journal of Labor Economics.

Volume (Year): 14 (1996)
Issue (Month): 4 (October)
Pages: 555-70
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:ucp:jlabec:v:14:y:1996:i:4:p:555-70

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  1. Kong-Pin Chen, 2004. "External Recruitment as an incentive Device," Econometric Society 2004 North American Summer Meetings 54, Econometric Society. [Downloadable!]
    Other versions:
  2. repec:ese:iserwp: is not listed on IDEAS
  3. René Kirkegaard, 2007. "Comparative Statics and Welfare in Heterogeneous Contests: Bribes, Caps, and Performance Thresholds," Working Papers 0702, Brock University, Department of Economics. [Downloadable!]
  4. Wu, Steven & Roe, Brian & Sporleder, Thomas, 2006. "Mixed Tournaments, Common Shocks, and Disincentives: An Experimental Study," MPRA Paper 21, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  5. Pfeifer, Christian, 2009. "An Intra-Firm Perspective on Wage Profiles and Employment of Older Workers with Special Reference to Human Capital and Deferred Compensation," Diskussionspapiere der Wirtschaftswissenschaftlichen Fakultät der Universität Hannover dp-413, Universität Hannover, Wirtschaftswissenschaftliche Fakultät. [Downloadable!]
  6. Edward P. Lazear & Kathryn L. Shaw, 2007. "Personnel Economics: The Economist's View of Human Resources," NBER Working Papers 13653, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Melero, Eduardo, 2004. "Evidence on Training and Career Paths: Human Capital, Information and Incentives," IZA Discussion Papers 1377, Institute for the Study of Labor (IZA). [Downloadable!]
  8. Donald Vandegrift & Abdullah Yavas & Paul Brown, 2007. "Incentive effects and overcrowding in tournaments: An experimental analysis," Experimental Economics, Springer, vol. 10(4), pages 345-368, December. [Downloadable!] (restricted)
  9. Lima, Francisco, 2000. "Internal labour markets: a case study," FEUNL Working Paper Series wp378, Universidade Nova de Lisboa, Faculdade de Economia. [Downloadable!]
  10. Theofanis Tsoulouhas & Charles Knoeber & Anup Agrawal, 2007. "Contests to become CEO: incentives, selection and handicaps," Economic Theory, Springer, vol. 30(2), pages 195-221, February. [Downloadable!] (restricted)
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  11. Johannes Münster, 2006. "Selection Tournaments, Sabotage, and Participation," Discussion Papers 118, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
  12. Lars Behrenz, 2001. "Who Gets The Job And Why? An Explorative Study Of Employers’ Recruitment Behavior," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 255-278, November. [Downloadable!]
  13. Christian Grund & Dirk Sliwka, 2002. "Envy and Compassion in Tournaments," Bonn Econ Discussion Papers bgse32_2002, University of Bonn, Germany. [Downloadable!]
    Other versions:
  14. Chris Doucouliagos & Phillip Hone & Mehmet Ulubasoglu, 2006. "Discrimination, Peformance and Career Progression in Australian Public Sector Labor Markets," Economics Series 2006_07, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance. [Downloadable!]
  15. Alberto Bayo-Moriones & Pedro Ortín-Ángel, 2003. "Internal promotion versus external recruitment: evidence in industrial plants," Working Papers 200303, Department of Business Economics, Universitat Autonoma de Barcelona. [Downloadable!]
  16. Wolter H.J. Hassink & Giovanni Russo, 2003. "Wage Differences between Incumbents and External Candidates," Working Papers 03-03, Utrecht School of Economics. [Downloadable!]
  17. Paul André & M. Martin Boyer & Robert Gagné, 2002. "Do CEOs Exercise Their Stock Options Earlier than Other Executives?," CIRANO Working Papers 2002s-71, CIRANO. [Downloadable!]
  18. Anup Agrawal & Charles R. Knoeber & Theofanis Tsoulouhas, . "Are Outsiders Handicapped in CEO Successions?," Working Paper Series 003, North Carolina State University, Department of Economics, revised Apr 2004. [Downloadable!]
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  19. M. Martin Boyer & Hernan Ortiz Molina, 2004. "Career Concerns of Top Executives, Managerial Ownership and CEO Succession," CIRANO Working Papers 2004s-34, CIRANO. [Downloadable!]
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  20. Oliver Gürtler & Johannes Münster, 2009. "Sabotage in dynamic tournaments," Discussion Papers 266, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
  21. Edward P. Lazear & Paul Oyer, 2003. "Internal and External Labor Markets: A Personnel Economics Approach," NBER Working Papers 10192, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  22. Jeffrey Carpenter & Peter Hans Matthews & John Schirm, 2007. "Tournaments and Office Politics: Evidence from a Real Effort Experiment," IZA Discussion Papers 2972, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
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