Poaching Workers in a Supply Chain: Enemy from Within?

Abstract

Poaching is the prevalent practice of recruiting workers who are already employed elsewhere. Economy-wide, it represents the primary mode by which workers flow directly from one firm to another. In this paper, we examine the interaction between the flow of goods and the flow of workers (via poaching) between firms linked in a supply chain. We find that the direction of worker poaching between supply chain partners can run counter to classical labor economics results. Specifically, in a supply chain, the less productive firm may offer its workers higher wages and poach workers from the more productive firm. We also find that worker flows accomplished via poaching impact supply chain management. First, we find that the identity of supply chain bottleneck may depend on whether poaching is available as a means to accomplish worker flows. Next, we find that the benefits of worker flows between supply chain partners in some cases outweigh the costs incurred, so no-poaching agreements would be worse for some supply chains. This net benefit of poaching between members of a supply chain is robust to the presence of outside labor market competitors as long as the competitors do not have high productivity. Thus, poaching workers from supply chain partners can often increase the benefit of operating in manufacturing hubs for all supply chain members.