"Managerial Migration, Institutional Rewards, Inter-firm Legitimacy Transfer"

Abstract

The study links the SME’s tactics for external legitimacy acquisition through hiring senior managers from incumbent leaders in exchange for institutional rewards. Two empirical questions guide this study. (1) Does the SME (small and medium enterprise) attract senior managers from legitimate organizations? (2) Does the recruitment of senior managers from legitimate organizations increases the duration of the SME’s survival? We answer these questions by using 1485 observations in 9 years. The result reveals that SMEs prefer to recruit managers from legitimate industrial leaders. They focus on organization-specific legitimacy more than managerial human capital or person-specific legitimacy. In exchange, the SME rewards the manager with institutional position (higher ranks). It implies that SMEs exchange one kind of institutional resources (carrier positions) with the other kind (organizational legitimacy). We also find that SMEs are able to expand their lifespan. The paper discusses implications for research and practice.