Getting a Job in Finance-The Strength of Collaboration Ties
Since the seminal papers of Mark Granovetter, Getting a Job and ‘The Strength of Weak Ties’, ithas been acknowledged that contacts are a valuable way of getting a job, and that weak ties aremore efficient than strong ties because the former convey more original information than thelatter. We would like to challenge this overemphasizing focus of network sociology oninformation. We first return to Granovetter’s empirical work and show that the ‘weak ties’ thatseem more helpful for getting jobs are generally former colleagues. One reason for this feature isnot that former colleagues increase ego’s information but rather that they value the pursuit ofpast collaboration. We examine then the consequence of collaboration ties hypothesis in thefinancial industry labor market. Based on results of previous research, we explain whycollaboration ties may be so valuable. In finance, the labor market values the assets that financialoperatives take with them from one firm to another, such as knowledge, know-how andcustomers. Since assets are to a certain extent shared among co-workers, it is worth hiringbusiness relations, former colleagues or moving in teams: it enables a better transfer of assetssuch as idiosyncratic working routines, distributed knowledge, or joint customers. Todemonstrate our claims we rely on an online survey launched with eFinancialCareers.fr collected in09/2008 among French financial employees (n=995). This questionnaire shows that working incore finance favors the accumulation of moveable key assets on the one hand and ofcollaboration ties on the other hand, ie that collaboration ties and moveable key assets arestrongly correlated. The moving of key assets, collaboration ties and notably the combination ofthose two dimensions all increases wages. Although firms try to secure key workers holding suchadvantages through contractual devices, those strategies fail since many employees, in order toremain in contact with those attractors, facilitate rather than prevent such movement. Finally thispaper suggests that the real firm is maybe not the formal firm itself but rather resides betweenfirms in the networks of collaboration ties formed by employees who are mobile.2Since the seminal works of Mark Granovetter, Getting a Job (1974) and ‘The Strength of WeakTies’ (1973), research in social science has been increasingly emphasizing the uniquelyinformational dimension of networks in job search and job mobility. Theoretically the weak tiesversus strong ties argument has been simplified into a more structural approach, with the alternatediversified versus redundant ties, implied by the structural hole argument (Burt, 1992). Thereforecontacts are viewed mainly, if not exclusively, especially in economic models, as informationprocessors passing on to ego, at a rate depending on the network structure, new informationabout job vacancies (Boorman, 1975; Montgomery, 1992; Ioannides and Datcher Loury, 2004).Thus contacts play the benevolent role of job agencies or that of head-hunters providingpotential employers and employees with valuable trustworthy information (Finlay and Coverdill,2002; Lin, 2001). Nevertheless, empirical research on the value of the informational networkprovided mixed results (Granovetter, 1983, 1995, 2005; Lin, 1999; Ioannides and Datcher Loury,2004). Several studies find a correlation between weak ties and final status or wage, but one thatappears to be mediated through a third variable such as the status of the contact (Lin et al, 1981;Wegener, 1991). Other studies based on a nation-wide sample find no clear relationship betweenthe strength of ties and pay (Bridges and Villemez, 1986; Mouw, 2003). This overemphasis oninformation has been also challenged by research that claims that strong ties can also be helpful,for different reasons than weak ties, because strong ties, although providing possibly less originalinformation, might be more likely to support and to influence the decision-makers (Bian, 1997;Yakubovich, 2005). We might have two mechanisms working in parallel, informing weak ties andsupporting strong ties, producing a rather undetermined relationship between strength of ties andvalue of the job.Nevertheless, both approaches are similar in the way they view contacts in the context ofchanging job. They both fail to link job-searching periods and working periods. The typicalsituation involves an unemployed person or a person unhappy at work, who is trying to find anew job and who is asking contacts either for information or for support (or both). In thisscenario, contacts, although they may be willing to help, remain more or less indifferent to thefirm where ego will find a job. They give information because giving information is not verycostly and they can expect information in return or they are helping someone with whom theyhave some bond and they can expect some kind of future reciprocity. This type of approach doesnot enable us to understand why the contact is so often a work contact, such as a formercolleague or a former client, who moreover frequently holds in part, if not totally, the power torecruit (Granovetter, 1974; Bridges and Villemez, 1986; Yakubovich, 2005). Work ties such asformer colleagues are generally classified as weak ties. This statement is correct if we measure itby emotional intensity, but it can be challenged if we measure it by the amount of time spentwhen ego and contact worked together. But classifying work contacts in weak/strong tie termsobscures the fact that work contacts cannot be seen as independent from the object of the quest.In such cases of help as when a former colleague helps to hire a former colleague, what is at stakeis nothing less than the pursuit of a fruitful work-collaboration. It is therefore not surprising tosee that in Bridges and Villemez (1986) the distinction between work and communal ties is morerelevant that the classical weak/strong ties in order to explain wages and that its effect issignificant at least for an important subsample such as Manager-Professional-Technical workers.The financial industry is a good observatory for studying the impact of collaboration ties. Asregards the importance of network and social ties, finance offers the media two conflictingimages: one of a world of selfishness and of great solitude, and another of a closed network ofclosely-bound insiders. A way of reconciling these two views is to see that finance is structurednot by strong emotional ties but by highly-structured collaboration ties that studies deemimportant for success (Roth, 2006; Burt, 1997). Finance is also a sector where pay and inequalitieshave been rising tremendously, benefiting from a wage premium that remains unexplained(Philippon, Resheff, 2009; Kaplan, Rauh, 2009). In previous work (Godechot, 2007, 2008a), weargue that those wages were due to financial operatives’ ability to commit a hold-up, that is tothreaten efficiently the firm to move the firm’s key assets to a competitor. Within our frameworksuch assets as knowledge, technology and clients are appropriated by financial employees and3multiplied by collaboration ties, leading to some spectacular team moves (Godechot, 2008a,2008b). This paper intends to strengthen the theoretical link between moveable assets andcollaboration ties and to offer a statistical exploration of its importance based on data from aneFinancialCareers.fr online survey collected in September 2008.The paper is organized as follows. In the initial section, we first revisit Granovetter’s empiricalwork and show that below weak ties we very often have collaboration ties. We then develop atheoretical framework that, in finance, links the importance of collaboration ties with theappropriation of key moveable assets. The third section presents the questionnaire on jobmobility in the financial industry, and the main variables. We confirm in the fourth section ourhypothesis linking moveable assets and collaboration ties, and those related dimensions to a jobposition at the core of financial markets and to higher wages. The fifth section shows that thecombination of moveable assets and collaboration ties also helps to circumvent the contractualdevices that try to restrain turn-over. In the final discussion section, we analyze howcollaboration ties may challenge the traditional way of viewing the nature of the firm in finance,and consider how they are related to classical measures of network structure.
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- Thomas Philippon & Ariell Reshef, 2009.
"Wages and Human Capital in the U.S. Financial Industry: 1909-2006,"
NBER Working Papers
14644, National Bureau of Economic Research, Inc.
- Philippon, Thomas & Reshef, Ariell, 2009. "Wages and Human Capital in the U.S. Financial Industry: 1909-2006," CEPR Discussion Papers 7282, C.E.P.R. Discussion Papers.
- Yannis M. Ioannides & Linda Datcher Loury, 2002.
"Job Information Networks, Neighborhood Effects and Inequality,"
Discussion Papers Series, Department of Economics, Tufts University
0217, Department of Economics, Tufts University.
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- Scott A. Boorman, 1975. "A Combinatorial Optimization Model for Transmission of Job Information through Contact Networks," Bell Journal of Economics, The RAND Corporation, vol. 6(1), pages 216-249, Spring.
- Daniel Beunza & David Stark, 2004. "Tools of the trade: the socio-technology of arbitrage in a Wall Street trading room," Industrial and Corporate Change, Oxford University Press, vol. 13(2), pages 369-400, April.
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