Newcomer Turnover, Replacement, and Firm Performance

Abstract

This study examines whether collective turnover rates relate to firm performance and how turnover properties such as newcomer turnover proportion of total turnover events and replacement of turnover through external hiring and internal mobility jointly influence the effect of collective turnover rates on firm performance. Using a dataset of 240 firms with 1,440 firm-year observations over 2006-2016, we find that firms with higher collective turnover rates generally have lower firm performance, but the negative effect of collective turnover is strengthened when firms have more newcomer departures of total turnover events (newcomer turnover proportion). Furthermore, our findings indicate that internal mobility utilizing existing employees buffers the disruptive effect of newcomer turnover proportion on firm performance, and the use of internal mobility is more effective at reducing the negative effect of newcomer turnover than external hiring. Our study contributes to the literature on collective turnover, suggesting that the disruptive effects of collective turnover rates are contingent upon who are leaving and the type of human capital flow.