Friendships and Strategic Behavior in Labor Markets

Abstract

This paper examines the ways in which organizations use employee networks to contend with strategic behavior in labor markets. We predict that in labor markets where strategic behavior is a concern, job-seekers with friends in the organization are more likely to receive job offers than those without friends. We find support for the strategic behavior hypothesis in a study of entry-level professionals in business and law. Organizations were significantly more likely to offer jobs to candidates with friends than to those without. Follow-on analyses provide insight into when organizations are most attentive to strategic behavior and thus most likely to weigh friendships in their offer decisions. The implications of this study for research on labor markets, networks, and inequality are discussed.