Where Should They Hire From? Platform Skills and the Value of New Hires in the Software Industry

Abstract

The software industry is unique in terms of its “platform economics” where many firms build their products based on dominant software platforms. Hiring workers from firms with high platform knowledge may thus create externalities for the recipient software firms. Yet, while prior studies have shown that hiring IT workers creates value for recipient firms, the sources of value of such hiring are unclear. This paper contributes to the literature by uncovering that the value created through hiring IT workers in the software industry stems largely from firms that are high in platform human capital. Using a large dataset derived from an online professional network, we show that hiring platform-skilled workers from firms that are high in platform human capital is associated with a statistically and economically significant increase in financial performance of the recipient firms. Further, the value of hiring derives from platform-skilled workers with graduate degrees or with tenure long enough at the source firms. We thus explicate the sources of hiring that increase value for software firms, and derive implications from the findings.