Prior Employers Research Articles

Finding Your First Job: Are Orthopedists in Training and Hiring Medical Practices on the Same Page?

A study of orthopedic surgeons in training and hiring practices that is designed to investigate the priorities of applicants and employers in the hiring process. Introduction: This study was designed to determine important factors to hiring practices when evaluating the application of a potential hire and compare them with the factors emphasized by candidates as most important to them in a job. Methods: This survey was designed to compare the priorities of hiring practices to job applicants with regards to several categories including: how applicants and jobs are identified, what factors might be important to a practice when evaluating job applicants and what factors might be important to a job applicant when applying. Hiring practices were further asked to elaborate on previous unsuccessful hires and the reasons for failure. Results: Hiring practices and applicants agree that personal or professional referrals are the most important resource for finding a job, but disagree in the utility of recruiters and social media. Hiring practices and potential applicants agree that the need for a particular subspecialty and recommendations are the most important factors for a practice to consider when choosing a new hire. Applicants tend to place a higher value on commitment to a region, personal connections and fellowship prestige, while practices are more interested in recommendations from residency directors, prior employers, operative ability and community involvement. Applicants and hiring practices both understand that the ability to practice within one’s subspecialty, salary potential and a candidate’s preference for location are critical. Hiring practices underestimate the importance of a starting salary and signing bonus to an applicant and overestimate the importance of practice reputation and the availability of ancillary services. Discussion/Conclusion: There are significant misunderstandings between young surgeons applying for their first job and hiring practices. To be successful young physicians should strive to understand the motivations of hiring groups. Similarly, orthopedic practices can save themselves significant time and money by understanding the motivations of surgeons entering the work force.

Design of employee pension benefits model and China's pension gender gap

The pension gender gap is a universal concern, and policymakers worldwide strive to address the factors leading to gender inequality. This study examines the pension gender gap problem and its causes and effects in China, conducting micro-empirical simulations on China's employee pension benefits model. We propose solutions to this gender inequality and suggest an intra-family pension benefits transfer for women in a family framework. For family units headed by a single woman, we recommend enhanced tax-deductible contributions by prior employers to strengthen the equality of pensions between genders throughout retirement. This additional support and enhancement of female pensions can effectively narrow the pension gap between male and female beneficiaries while maintaining the system's long-term sustainability. More importantly, these proposed enhancements minimize acute poverty while improving the living standards of female pensioners.

Examining the cohesiveness and nestedness entrepreneurial ecosystems: evidence from British FinTechs

It is not clear if entrepreneurial ecosystems are cohesive wholes within a region that support high-growth entrepreneurship across a variety of sectors or if ecosystems are made up of several, nested sectoral-specific sub-ecosystems. This debate speaks to larger disagreements about what entrepreneurial ecosystems are and how they work. This paper addresses this research gap by using a novel methodology based on career history data of founders and top management teams of high-growth FinTech ventures. This method is used to classify the backgrounds of 1,570 individuals in 380 British FinTech firms based on their prior job histories and employers into categories such as technology or finance. The paper finds substantial evidence of nestedness in the ecosystems, but rather than FinTech ecosystems being specialized finance or technology clusters, more generic forms of managerial know-how remain crucial to firm innovation and growth. This suggests that even very advanced ecosystems remain nested, with few cross-over points between different communities.

A Chip Off the Old Block? The Genesis of Geographic Diversification Strategies in New Ventures

We advance research on geographic diversification by joining insights from imprinting theory in organizations to offer a novel theory of new venture diversification strategies. We propose that geographic diversification strategies of new ventures resemble those of their founders’ prior employers, reinforcing the central imprinting role that founders’ prior employment plays for new ventures. Furthermore, we hypothesize that founders’ position at their prior employers reinforces, while new venture’s age weakens, the prior employer-led geographic diversification effect. We test our hypotheses using a longitudinal dataset of Swedish new ventures that exports early in their lifecycle.

H. Gregg Lewis Prize

Previous articleNext article FreeH. Gregg Lewis PrizePDFPDF PLUSFull Text Add to favoritesDownload CitationTrack CitationsPermissionsReprints Share onFacebookTwitterLinked InRedditEmailQR Code SectionsMoreThe H. Gregg Lewis Prize for the best paper published in the Journal of Labor Economics during 2016–2017 has been awarded to Lena Hensvik and Oskar Nordström Skans for “Social Networks, Employee Selection, and Labor Market Outcomes,” which appeared in the October 2016 issue of the Journal.The Prize Committee consisted of Melvin Stephens Jr. (chair), Marianne Page, and Jessica Pan (previous Lewis Prize winner). Social networks have long been of interest to labor economists, and access to administrative data in recent years has allowed researchers to test the theoretical implications of network models. Hensvik and Skans examine the importance of employee referrals in the hiring of new workers. If high-quality workers tend to interact with other high-quality workers through their social networks, then employers can leverage these relationships through referrals in situations where the quality of potential hires is not easily observed. Employee referrals in the presence of networks yield predictions for the quality and wages of new hires as well as for the probability of using referrals in the hiring process. A long-standing hurdle to empirically testing these ideas, however, is information on worker quality that is unobserved by employers but is observed, perhaps imperfectly, by employees.Hensvik and Skans leverage population register data from Sweden to create a sample of newly hired and incumbent male workers. Worker networks are created through linking spells of overlapping employment at prior employers. Key to their analysis is that nearly every 18- or 19-year-old Swedish male underwent the military draft process in which they were subjected to both cognitive and noncognitive testing, with individuals kept unaware of their own test results. Using these test scores, which are available in the register data, along with information on networks through prior employment, the authors confirm the numerous predictions on the impact of referrals through employee networks. The finding that firms hire workers through the social ties of more productive employees has important implications for understanding wage inequality. The use of such employee referral networks implies that greater ability sorting in the labor market will increasingly work to the disadvantage of equally productive workers without access to high-ability ties. The committee was impressed with the authors’ creative use of population register data to study this important topic.Past H. Gregg Lewis Prize winners:1990–1991Robert Gibbons and Lawrence F. Katz1992–1993James N. Brown and Audrey Light1994–1995John Bound, Charles Brown, Greg J. Duncan, and Willard L. Rodgers1996–1997Christina H. Paxson and Nachum Sicherman1998–1999Derek A. Neal2000–2001H. Lorne Carmichael and W. Bentley MacLeod2002–2003Eric D. Gould2004–2005Pascal Courty and Gerald Marschke2006–2007Fabian Lange2008–2009Maxim Poletaev and Chris Robinson2010–2011William R. Kerr and William F. Lincoln2012–2013Laura Giuliano2014–2015Jessica Pan Previous articleNext article DetailsFiguresReferencesCited by Journal of Labor Economics Volume 36, Number 3July 2018 Published for the Society of Labor Economists, Economics Research Center/ NORC Article DOIhttps://doi.org/10.1086/698528 Views: 273Total views on this site © 2018 by The University of Chicago. All rights reserved.PDF download Crossref reports no articles citing this article.

Interfirm Ties through Scientist Mobility: Implications for R&D Partner Selection

In this paper we extend the theory of information economics to the literature on R&D alliance formation and advance research by examining the role of scientist mobility in facilitating partner selection for R&D collaborations. Specifically, we examine the role of scientist mobility in reducing information asymmetries between R&D firms, and we develop hypotheses on how R&D firms select alliance partners within high-tech industries. Mobile scientists can act as information intermediaries and facilitate information sharing between their current and prior employers. We suggest that the information intermediated by mobility of scientists between two potential partners privately and directly reduces information asymmetries between them, thereby helping firms access opportunities for collaboration. We demonstrate that scientist mobility will have a more pronounced effect on the likelihood that firms enter into an R&D partnership when firms lack direct knowledge about each other’s technological and other resources.

Noncompetes and Employee Mobility

We study the relationship between employment noncompetition agreements and employee mobility patterns using novel data from the 2014 Noncompete Survey Project. Specifically, we examine how noncompetes relate to the duration and nature of employee mobility, and we leverage our detailed individual-level survey data to identify and explore the precise mechanisms underlying the relationships we observe. We find that individuals with noncompetes appear to exhibit materially longer tenures and are more likely to depart for new employers that do not “compete” with their prior employers. To account for these patterns, we investigate the role noncompetes may play at each stage of the mobility “process”: job search, employer recruitment, offer receipt, negotiation, offer acceptance, etc. We present evidence that employees bound by noncompetes substitute job search activity and receptivity to recruitment in the direction of noncompetitors and that noncompetes are a factor in the choice to turn down approximately 40 percent of the offers employees receive from competitors.

Returning to Work After Treatment for a Hematological Malignancy

Many individuals diagnosed with cancer can experience a crisis associated with the challenge of returning to work posttreatment. To date, there is limited work on this topic. This article makes a contribution to this area by providing a subset of findings from a qualitative study that documents the role of the employer during posttreatment return to work from the perspective of individuals diagnosed with a hematological cancer. The study involved 45 in-depth interviews with individuals diagnosed with a hematology cancer that were audio-recorded, transcribed verbatim, coded and thematically analyzed. The findings indicate that the crisis posed by return to work after treatment for a hematological malignancy was ameliorated for individuals with supportive links to prior employers. There are a number of strategies that supportive employers used to facilitate the return to work, including keeping the position open, staging the return, and changing the work role if necessary. The practical implications of the findings for posttreatment supportive care are explored.

Thoughts on the Influence of Devastating Events with Prior Employers on Nascent Entrepreneurs: A Research on Japanese IPO Companies in or after 2001

This article discusses the influence of work experience at corporations, which have gone through devastating events (“Events”), on start-up success. Founders and board members/auditors of companies newly listed on the Japanese stock exchange between 2001 and 2011 (“IPO companies”) have been reviewed. The work history data of such founders and board members/auditors are collected from IPO prospectus, and their former employers are categorized by types of Events such as “legal liquidation”, “voluntary liquidation”, “civil rehabilitation”, “restructuring” or “absorption type merger”. Statistical analysis shows that significantly more board members/auditors have work experience at “tosan” (a Japanese term commonly used to collectively mean “civil rehabilitation”, “legal liquidation”, “bankruptcy” and “voluntary liquidation”) corporations compared to those who have no such experience. On the other hand, work experience at “restructuring”, “merger”, “scandal” or “transform to holding company” corporations was negatively correlated to the number of board members/auditors of IPO companies. Company age was also negatively correlated.

Geographical Proximity to Parent Firms and the Knowledge Impact of New Ventures

Research examining new ventures founded by individuals leaving their prior employers (parent firms) highlights the importance of parent knowledge inherited by these ventures though their founders. However, this research has not examined whether ventures continue to draw on valuable parent firm knowledge after founding. We examine how a venture’s geographical proximity to its parent firms allows it continued access to parent firm knowledge and argue that this access significantly influences the impact of the knowledge the venture creates. However, we predict that proximity matters less when the venture has established more direct, substitutive mechanisms for transferring knowledge from its parents through technological overlap, scientist migration, and its own recombinative capability. Controlling for endogenous effects, we test our predictions on a sample of 242 biotechnology ventures founded during the period 1990–2000 and tracked till 2009. We discuss contributions of this study to research on entrepren...

"Incumbent Status, Interfirm Mobility and Entrant Growth"

In this paper we examine how personnel flows from incumbents to entrants affect entrant growth after a significant break in the rules governing competition in an industry. We argue that the time-varying network of personnel mobility between incumbents produces a status hierarchy and measures how technical knowledge and social resources are distributed among them. In our construal the hierarchy is split in three discrete groups – high, middle and low status firms. We assume that the location of an individual’s prior employers in the incumbent network should determine qualitatively the kind of knowledge these hires bring to an entrant and thus their contribution to the entrant’s growth. In particular, we argue that hires from middle-status incumbents are more oriented towards growth and suffer less status incongruence than hires from high status incumbents. Also, the knowledge of low status hires is more fragmented and idiosyncratic than either high or middle status hires. Therefore middle status hires should have a more positive impact on entrant expansion than hires from high or low status firms. This argument is supported by our analysis. Our analysis also shows that the network structure converges over time to a stable high-status and middle-status pattern, which can be considered emergent in Bearman’s (1997) definition, and that the effect on entrant growth of the incumbent status hierarchy increases as the hierarchy becomes better defined. The industry studied is foreign exchange trading among commercial banks from 1973, when the Bretton Woods agreement regulating foreign exchange trading was abrogated, to 1993.

A Thought on the Influence of Problematic Event at Prior Employers to Entrepreneurs

A Thought on the Influence of Problematic Event at Prior Employers to Entrepreneurs

The Small Firm Effect and the Quality of Entrepreneurs

This paper argues that a negative relationship between firm size and the likelihood of employees entering entrepreneurship could be driven by small firm employees acquiring specific human capital in industries where new business creation incurs lower entry costs. Contrary to the existing theories, this explanation on the small firm effect suggests a short-term rather than the persistent quality difference between entrepreneurs coming from large firms and those from small firms. To explore the plausibility of this alternative explanation, this paper examines the persistence of the small firm effect on new business survival and the founders’ post-entry occupational choice. Using employeremployee matched panel data obtained from Statistics Denmark, I find that the size of entrepreneurs’ prior employers continues to have a negative correlation with the survival of startups for the first three years, but the size effect gradually fades away afterwards. The magnitude of the correlation is largely reduced if the new businesses were formed in sectors that are unrelated to founders’ parent firms. Moreover, entrepreneurs coming from small firms are much more likely to move into unemployment if their first startups did not survive.

401(k) plan asset allocation, account balances, and loan activity.

The Employee Benefit Research Institute (EBRI) and the Investment Company Institute (ICI) have been collaborating for the past two years to collect data on participants in 401(k) plans. This effort, known as the EBRI/ICI Participant-Directed Retirement Plan Data Collection Project, has obtained data for 401(k) plan participants from certain of EBRI and ICI sponsors and members serving as plan recordkeepers and administrators. The report includes 1996 information on 6.6 million active participants in 27,762 plans holding nearly $246 billion in assets. The data include demographic information, annual contributions, plan balances, asset allocation, and loans, and are currently the most comprehensive source of information on individual plan participants. In 1996, the first year for which data are ready for analysis, the EBRI/ICI database appears to be broadly representative of the universe of 401(k) plans. Key findings include: for all participants, 44.0 percent of the total plan balance is invested in equity funds, 19.1 percent in employer stock, 15.1 percent in guaranteed investment contracts (GICs), 7.8 percent in balanced funds, 6.8 percent in bond funds, 5.4 percent in money funds, 0.8 percent in other stable value funds, and 1.0 percent in other or unidentified investments. This allocation implies that over two-thirds of plan balances are invested directly or indirectly in equity securities. Asset allocation varies with age. For instance, on average, individuals in their twenties invested 76.8 percent of assets in equities and only 22.1 percent in fixed-income investments. By comparison, individuals in their sixties invested 53.2 percent of their assets in equities and 45.9 percent of assets in fixed-income investments. Investment options offered by 401(k) plans appear to influence asset allocation. For example, the addition of company stock substantially reduces the allocation to equity funds and the addition of GICs lowers allocations to bond and money funds. Employer contributions in the form of company stock affect participant allocation behavior. Participants in plans in which employer contributions are made in company stock appear to decrease allocations to equity funds and to increase the allocation of company stock in self-directed balances. The average account balance (net of plan loans) for all participants is $37,323. The balances, however, represent only amounts with current employers and do not include amounts remaining in the plans of prior employers. Nor do the balances indicate what savings would be in a "mature" 401(k) plan program. The average balances of older workers with long tenure at one employer indicate that a mature 401(k) plan program will produce substantial account balances. For example, individuals in their sixties with at least 30 years of tenure have average account balances in excess of $156,000; those in their fifties have balances in excess of $117,000.

Entrant Growth and the Network of Interfirm Mobility in the Foreign Exchange Industry

In this paper we examine how personnel flows from incumbents to entrants affect entrant growth after a significant break in the rules governing competition in an industry. We argue that the time-varying network of personnel mobility between incumbents measures how technical knowledge and social resources are distributed among them. Consequently, where the prior employers of personnel are located in the incumbent network should determine the quality of knowledge these hires bring to an entrant and thus their contribution to the entrant's growth. We analyze the time-varying mobility network among incumbents in terms of its global structure and in terms of the local structure surrounding each entering firm. Our analysis shows that the global structure converges over time to a stable core and periphery pattern, which can be considered emergent in Bearman's (1997) definition. Entrant employees with job histories in the core significantly decrease the entrant's growth rate, whereas employees from the periphery increase growth. Also, entrants that occupy structural holes in the local network grow faster. The industry studied is foreign exchange trading among commercial banks from 1973 to 1993.

The Danger of Submitting an Early Letter of Resignation

To the Editor:—Change in academic jobs is an important and common pathway for promotion in academic medicine. About 9% of physicians change jobs each year in America.1,2 The frequency is even higher for academic physicians because of limited availability of internal promotions in a pyramidal system. However, the perils of providing early written notice of resignation to a current employer in anticipation of a new job based only on a letter of intent of employment and before securing hospital privileges at a new hospital of employment have not been analyzed or reported. A 53-year-old board-certified academic gastroenterologist received, signed, and returned a letter of intent from a large teaching hospital to start work 3 months later as Chief of Gastroenterology at a guaranteed salary for several years. Employment at the new hospital was contingent on hospital credentialing. The physician anticipated rapid hospital privileging because of a professional history of no malpractice judgements or settlements, no adverse actions reported to the National Practitioner Data Bank, and no adverse actions by any hospital or medical licensing body. The physician thereupon submitted a letter of resignation effective 3 months thereafter to his current employer, an academic hospital, to satisfy professional etiquette and to start fulfilling his contractual obligations regarding notice. The physician promptly submitted a completed application, including all 26 requested supporting documents, for clinical privileges at the new hospital. The new position was placed in jeopardy immediately thereafter. First, the proffered written contract contained a new and unacceptable clause granting the hospital the right to unilaterally reduce the guaranteed salary at any time, which took two revised contracts and 75 days of negotiations for mutually satisfactory resolution. Second, hospital privileging was delayed for 100 days after application submission because of the 24 required further documents from the 6 prior employers or other individuals in the physician’s 22-year long academic career; these documents included 4 character references, 7 hospital evaluations, 6 hospital verifications, 4 credential verifications, and 3 malpractice claims histories from the most recent malpractice carriers. Because of delays, the physician was compelled to postpone his new job for 40 days, experienced considerable psychological stress, felt he signed a less favorable contract because of a weakened bargaining position, and experienced a modest loss of income. Fortuitously, the financial loss was mitigated because the physician requested and was granted a 1-month extension beyond his date of resignation at his old job. This case describes previously unreported and unappreciated perils associated with a physician job change. Although the reported physician was a gastroenterologist, the reported problems pertain to all physicians, including internists or general practitioners. To avoid these perils, a physician should unambiguously secure a new position at satisfactory terms before unambiguously relinquishing an old position; should plan for delays in hospital credentialing because of the voluminous required documentation and arduous process; and should resign with sufficient notice from his current employer to maintain cordial professional relations and satisfy contractual obligations. Legal advice is recommended. Whereas the proffered advice of securing a contract at a new job before resigning from an existing job pertains to any job, physicians are particularly vulnerable to problems in changing jobs because of the complex nature of their job responsibilities; the often complex nature of their financial agreements, which often includes a base salary plus an incentive plan; the professional obligation to provide adequate notice to their existing employers; and the need to secure hospital privileges for employment at a new job. Hospitals should consider means to streamline the credentialing process by (1) requiring all hospitals to respond within 30 days to physician credentialing queries, (2) substituting secure computer-based communications for regular surface mail, and (3) instituting a centralized, secure, computer-based national database for (at least parts of) credentialing, resembling the National Practitioner Data Bank.

Innovation Law Handbook

Entrepreneurs often look on the law as an inconvenience - an issue to be left for later when time and budget permit. Many reasons may explain this attitude. Early-stage ventures are often more concerned with payroll than paying attorneys for issues that do not seem to matter today. Lawyers contribute to this entrepreneurial malaise. They are trained to provide conservative advice - designing solutions around worst-case rather than likely scenarios. Entrepreneurs are, by definition, risk-takers and out-of-the-box thinkers and are justifiably frustrated when legal counsel seems more of an impediment to ideas or opportunities rather than a facilitator. The widespread view that lawyers always say is a major reason why entrepreneurs avoid legal advice - lawyers also often cost a lot. These reasons and, we suspect, many others often lead entrepreneurs to ignore legal issues at the earliest stages of their ventures. Yet this is often the precise moment at which legal opinion and protection are most valuable. Unfortunately, as many find out too late, entrepreneurs ignore legal issues at their peril. The field of new business ventures is littered with companies that fail for no other reason than that their legal house was not in order. Some fail to defend their investments with appropriate intellectual property protections. Others sign contracts that included unknown onerous terms. Some fail to separate their knowledge from that of prior employers. Many entrepreneurs lose personal savings by failing to properly incorporate. Finally, in a post 9/11 environment, technology ventures that fail to account for changes in immigration laws and enforcement jeopardize, not just the business, but the visa-status of their employees and founders. This Handbook seeks to encourage legal compliance and ordering by simply and accessibly introducing entrepreneurs to the most common areas of law that affect early-stage companies. From contracts to intellectual property, corporations to immigration, this Handbook serves as a primer on these important areas of law. Recognizing and identifying the legal issues that impact your ventures is the first step in ensuring that they do not endanger the health of the company.

Does a Foot in the Door Matter? White-Nonwhite Differences in the Wage Return to Tenure and Prior Workplace Experience

[Author Affiliation]Arthur H Goldsmith, Department of Economics, Washington and Lee University, Lexington, VA 24450, USA; GoldsmithA@wlu.edu; corresponding authorDarrick Hamilton, Milano--The New School of Management and Urban Policy, 72 Fifth Avenue, New York, NY 10011, USA; hamiltod@newschool.eduWilliam Darity Jr, Department of Economics, University of North Carolina at Chapel Hill, Chapel Hill, NC 27514, USA; darity@unc.edu This work is supported by grant #0213838 from the National Science Foundation.[Acknowledgment]We are grateful for suggestions provided by Barry Hirsch and seminar participants at Bond University, Gold Coast, Australia. In addition, we are grateful for comments from Julie Hotchkiss, Co-Editor for this journal, and two anonymous referees. This paper was presented at the 2004 Southern Economic Association Meetings.1. OverviewThere is an extensive literature documenting the lower wages of black and Latino workers relative to white workers in the United States. The explanations for these racial and ethnic wage disparities have ranged from differential accumulation of human capital to labor market discrimination.1 Farmer and Terrell (1996), and more recently Lewis and Terrell (2001), extend this literature by advancing a hypothesis, which we summarize as the theory of ability misperception . This hypothesis explains how group membership may differentially influence the gains associated with workplace experience, and hence the relative wages of black and Latino workers over the course of their working lifecycle.Their basic idea is twofold: First, employers believe nonwhite employees acquired fewer skills on prior jobs than white workers. Thus, employers will reward additional experience with prior employers to a greater extent for white workers than for nonwhite workers. We refer to this hypothesis as Proposition 1 . This first proposition falls under the umbrella of statistical discrimination, which explains wage inequality as a result of employers offering nonwhite workers lower wages as a result of employer reliance on their perception that the distribution of skills for nonwhite workers is worse than that of white workers.Second, as employers directly observe nonwhite workers on the job, they come to realize that their perceptions concerning the distribution of skills for nonwhite workers were incorrect and, consequently, they have underrated the ability of nonwhite employees. This learning leads employers to update their assessment of the relative productivity of nonwhite workers. Therefore, racial/ethnic differences in the return to additional tenure or seniority with the current employer will be smaller than the racial/ethnic difference in the return to prior experience when Proposition 1 holds. This prediction constitutes Proposition 2 of the theory of ability misperception .In addition, we introduce a third proposition (or a strong form of Proposition 2), which suggests that the returns to additional tenure for nonwhite employees will actually exceed that of white employees. Thus, Proposition 2 requires that the difference in returns to additional tenure with the current employer between nonwhite and white workers be smaller than the difference in returns to prior experience, while Proposition 3 requires that nonwhite workers actually receive a higher return for tenure. The purpose of this paper is to advance the existing empirical literature aimed at evaluating the validity of the propositions central to the theory of ability misperception using data drawn from the Multi-City Study of Urban Inequality (MCSUI).If Farmer and Terrell (1996) and Lewis and Terrell (2001) are correct that employers underestimate the skills of nonwhite workers before directly observing them at the worksite, then many capable nonwhite applicants will be denied work, and, if employed, will suffer undue economic losses. …

New developments concerning negligent hiring in municipal governments

Focuses on a lack of reasonable care in the employment selection process leading to litigation in the human resources field in the USA. Uses sample cases to show neglect in these areas, including a wrongful shooting death in Sacramento among others. Posits that a simple way to ensure that employers hire only safe and competent employees is for prior employers to provide as much information as possible about potential employees.

Raids, Rewards, and Reputations in the Market for CEO Talent

We examine the basic hypothesis that the market for managerial talent rewards managers from firms with superior stock price performance. We identify a set of outside CEO hires in a set of large publicly traded firms and investigate the stock price performance of the prior employers of these executives. Using 5-year buy-and-hold returns as our basic performance measure, we find that the prior employers of our sample executives did, on average, exhibit superior performance compared to a variety of benchmarks. A conditional logit analysis confirms that superior firm performance increases the likelihood that an executive will get an outside CEO job. Our results are most pronounced for executives who jump immediately from their prior employer to the new employer (raids) and for executives who were more highly ranked at their prior employer. We also examine compensation contracts and find that executives are typically awarded large initial hiring grants composed of stock options, restricted stock, and cash signing bonuses. These grants are highly correlated with the value of the unvested option and restricted stock position the executive leaves behind at his old employer. The evidence also suggests that these grants are positively related to prior firm performance, even after controlling for the forfeited position at the prior employer. We interpret our findings as providing substantial support for the basic hypothesis that superior stock price performance enhances an executive's external labor market opportunities. In our view this is an interesting and important finding, as it supports the basic assumption underlying a large class of models concerning executive decision making and contracting in the presence of career concerns.