[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/a/inm/orstsc/v3y2018i4p668-682.html
   My bibliography  Save this article

(When) Is Hiring Strategic? Human Capital Acquisition in the Age of Algorithms

Author

Listed:
  • Daniel W. Elfenbein

    (Washington University in St. Louis, St. Louis, Missouri 63130)

  • Adina D. Sterling

    (Stanford University, Stanford, California 94305)

Abstract
This paper examines when and under what conditions whom to hire is a strategic decision. We identify four mechanisms involved in hiring that add to the “strategicness” of human capital decisions. We posit that, to the degree that human capital outcomes are influenced by these mechanisms, hiring cannot be effectively delegated or treated independently from a firm’s other strategic decisions, nor will a “best athlete” approach to hiring lead to optimal results. We outline the shifts in scholarly attention required for scholars to conceptualize hiring as a strategic process, and we argue that this conceptualization is critical given the increasing use of data science tools by industry to support and automate hiring decisions. By delving into the mechanisms and conditions that make hiring strategic, we contribute to a broader understanding of how and why firms acquire human capital and highlight gaps and opportunities for future research.

Suggested Citation

  • Daniel W. Elfenbein & Adina D. Sterling, 2018. "(When) Is Hiring Strategic? Human Capital Acquisition in the Age of Algorithms," Strategy Science, INFORMS, vol. 3(4), pages 668-682, December.
    • Handle: RePEc:inm:orstsc:v:3:y:2018:i:4:p:668-682
    DOI: 10.1287/stsc.2018.0072
    as

    Download full text from publisher

    File URL: https://doi.org/10.1287/stsc.2018.0072
    Download Restriction: no
    File URL: https://libkey.io/10.1287/stsc.2018.0072?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Camelia M. Kuhnen & Paul Oyer, 2016. "Exploration for Human Capital: Evidence from the MBA Labor Market," Journal of Labor Economics, University of Chicago Press, vol. 34(S2), pages 255-286.
    2. Iain M. Cockburn & Rebecca M. Henderson, 1998. "Absorptive Capacity, Coauthoring Behavior, and the Organization of Research in Drug Discovery," Journal of Industrial Economics, Wiley Blackwell, vol. 46(2), pages 157-182, June.
    3. Jan W. Rivkin & Nicolaj Siggelkow, 2003. "Balancing Search and Stability: Interdependencies Among Elements of Organizational Design," Management Science, INFORMS, vol. 49(3), pages 290-311, March.
    4. Boris Groysberg & Linda-Eling Lee & Ashish Nanda, 2008. "Can They Take It With Them? The Portability of Star Knowledge Workers' Performance," Management Science, INFORMS, vol. 54(7), pages 1213-1230, July.
    5. Gary S. Becker, 1962. "Investment in Human Capital: A Theoretical Analysis," NBER Chapters, in: Investment in Human Beings, pages 9-49, National Bureau of Economic Research, Inc.
    6. Aaron Chalfin & Oren Danieli & Andrew Hillis & Zubin Jelveh & Michael Luca & Jens Ludwig & Sendhil Mullainathan, 2016. "Productivity and Selection of Human Capital with Machine Learning," American Economic Review, American Economic Association, vol. 106(5), pages 124-127, May.
    7. Victor M. Bennett & Daniel A. Levinthal, 2017. "Firm Lifecycles: Linking Employee Incentives and Firm Growth Dynamics," Strategic Management Journal, Wiley Blackwell, vol. 38(10), pages 2005-2018, October.
    8. Evan Starr & Natarajan Balasubramanian & Natarajan Balasubramanian, 2018. "Screening Spinouts? How Noncompete Enforceability Affects the Creation, Growth, and Survival of New Firms," Management Science, INFORMS, vol. 64(2), pages 552-572, February.
    9. Patrick Bayer & Stephen L. Ross & Giorgio Topa, 2008. "Place of Work and Place of Residence: Informal Hiring Networks and Labor Market Outcomes," Journal of Political Economy, University of Chicago Press, vol. 116(6), pages 1150-1196, December.
    10. Timothy F. Bresnahan & Erik Brynjolfsson & Lorin M. Hitt, 2002. "Information Technology, Workplace Organization, and the Demand for Skilled Labor: Firm-Level Evidence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(1), pages 339-376.
    11. Bartling, Björn & von Siemens, Ferdinand A., 2010. "The intensity of incentives in firms and markets: Moral hazard with envious agents," Labour Economics, Elsevier, vol. 17(3), pages 598-607, June.
    12. Sendil K. Ethiraj & Pranav Garg, 2012. "The Division of Gains from Complementarities in Human-Capital-Intensive Activity," Organization Science, INFORMS, vol. 23(3), pages 725-742, June.
    13. Edward P. Lazear, 2000. "Performance Pay and Productivity," American Economic Review, American Economic Association, vol. 90(5), pages 1346-1361, December.
    14. Heli C. Wang & Jinyu He & Joseph T. Mahoney, 2009. "Firm‐specific knowledge resources and competitive advantage: the roles of economic‐ and relationship‐based employee governance mechanisms," Strategic Management Journal, Wiley Blackwell, vol. 30(12), pages 1265-1285, December.
    15. Pierre Azoulay & Joshua S. Graff Zivin & Jialan Wang, 2010. "Superstar Extinction," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 125(2), pages 549-589.
    16. Matt Marx & Deborah Strumsky & Lee Fleming, 2009. "Mobility, Skills, and the Michigan Non-Compete Experiment," Management Science, INFORMS, vol. 55(6), pages 875-889, June.
    17. Muriel Niederle & Alvin E. Roth, 2009. "Market Culture: How Rules Governing Exploding Offers Affect Market Performance," American Economic Journal: Microeconomics, American Economic Association, vol. 1(2), pages 199-219, August.
    18. George P. Huber, 1991. "Organizational Learning: The Contributing Processes and the Literatures," Organization Science, INFORMS, vol. 2(1), pages 88-115, February.
    19. repec:bla:jindec:v:46:y:1998:i:2:p:157-82 is not listed on IDEAS
    20. Leung, Ming D, 2017. "Learning to hire? Hiring as a dynamic experiential learning process in an online market for contract labor," Institute for Research on Labor and Employment, Working Paper Series qt5rj3f9xg, Institute of Industrial Relations, UC Berkeley.
    21. Francis Kramarz & Marie-Laure Michaud, 2002. "The Shape of Hiring and Separation Costs," Working Papers 2002-38, Center for Research in Economics and Statistics.
    22. David H. Autor, 2003. "Outsourcing at Will: The Contribution of Unjust Dismissal Doctrine to the Growth of Employment Outsourcing," Journal of Labor Economics, University of Chicago Press, vol. 21(1), pages 1-42, January.
    23. Abowd, John M. & Kramarz, Francis, 2003. "The costs of hiring and separations," Labour Economics, Elsevier, vol. 10(5), pages 499-530, October.
    24. Lawrence F. Katz & Alan B. Krueger, 2016. "The Rise and Nature of Alternative Work Arrangements in the United States, 1995-2015," Working Papers 603, Princeton University, Department of Economics, Industrial Relations Section..
    25. Giovanni Gavetti & Anoop Menon, 2016. "Evolution Cum Agency: Toward a Model of Strategic Foresight," Strategy Science, INFORMS, vol. 1(3), pages 207-233, September.
    26. Di Tella, Rafael & MacCulloch, Robert, 2005. "The consequences of labor market flexibility: Panel evidence based on survey data," European Economic Review, Elsevier, vol. 49(5), pages 1225-1259, July.
    27. Ian Larkin & Lamar Pierce & Francesca Gino, 2012. "The psychological costs of pay‐for‐performance: Implications for the strategic compensation of employees," Strategic Management Journal, Wiley Blackwell, vol. 33(10), pages 1194-1214, October.
    28. Edward P. Lazear & Kristin McCue, 2018. "What Causes Labor Turnover To Vary?," NBER Working Papers 24873, National Bureau of Economic Research, Inc.
    29. Adina D. Sterling & Roberto M. Fernandez, 2018. "Once in the Door: Gender, Tryouts, and the Initial Salaries of Managers," Management Science, INFORMS, vol. 64(11), pages 5444-5460, November.
    30. Rodolphe Durand & Robert M. Grant & Tammy L. Madsen & Lenos Trigeorgis & Jeffrey J. Reuer, 2017. "Real options theory in strategic management," Strategic Management Journal, Wiley Blackwell, vol. 38(1), pages 42-63, January.
    31. Pankaj Ghemawat & Daniel Levinthal, 2008. "Choice Interactions and Business Strategy," Management Science, INFORMS, vol. 54(9), pages 1638-1651, September.
    32. George Baker & Robert Gibbons & Kevin J. Murphy, 2002. "Relational Contracts and the Theory of the Firm," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(1), pages 39-84.
    33. Adina D. Sterling, 2014. "Friendships and Search Behavior in Labor Markets," Management Science, INFORMS, vol. 60(9), pages 2341-2354, September.
    34. Jay B. Barney, 1986. "Strategic Factor Markets: Expectations, Luck, and Business Strategy," Management Science, INFORMS, vol. 32(10), pages 1231-1241, October.
    35. Edward P Lazear, 1998. "Hiring Risky Workers," Palgrave Macmillan Books, in: Isao Ohashi & Toshiaki Tachibanaki (ed.), Internal Labour Markets, Incentives and Employment, chapter 7, pages 143-158, Palgrave Macmillan.
    36. Jeremy T. Fox & Patrick Bajari, 2013. "Measuring the Efficiency of an FCC Spectrum Auction," American Economic Journal: Microeconomics, American Economic Association, vol. 5(1), pages 100-146, February.
    37. Garicano, Luis & Hubbard, Thomas N., 2005. "Hierarchical sorting and learning costs: Theory and evidence from the law," Journal of Economic Behavior & Organization, Elsevier, vol. 58(2), pages 349-369, October.
    38. Jack A. Nickerson & Todd R. Zenger, 2008. "Envy, comparison costs, and the economic theory of the firm," Strategic Management Journal, Wiley Blackwell, vol. 29(13), pages 1429-1449, December.
    39. Daniel W. Elfenbein & Todd Zenger, 2017. "Creating and Capturing Value in Repeated Exchange Relationships: The Second Paradox of Embeddedness," Organization Science, INFORMS, vol. 28(5), pages 894-914, October.
    40. Milgrom, Paul & Roberts, John, 1995. "Complementarities and fit strategy, structure, and organizational change in manufacturing," Journal of Accounting and Economics, Elsevier, vol. 19(2-3), pages 179-208, April.
    41. Paul Almeida & Bruce Kogut, 1999. "Localization of Knowledge and the Mobility of Engineers in Regional Networks," Management Science, INFORMS, vol. 45(7), pages 905-917, July.
    42. Garicano, Luis & Hubbard, Thomas N, 2007. "Managerial Leverage Is Limited by the Extent of the Market: Hierarchies, Specialization, and the Utilization of Lawyers' Human Capital," Journal of Law and Economics, University of Chicago Press, vol. 50(1), pages 1-43, February.
    43. Boris Groysberg & Linda-Eling Lee, 2009. "Hiring Stars and Their Colleagues: Exploration and Exploitation in Professional Service Firms," Organization Science, INFORMS, vol. 20(4), pages 740-758, August.
    44. Roth, Alvin E & Xing, Xiaolin, 1994. "Jumping the Gun: Imperfections and Institutions Related to the Timing of Market Transactions," American Economic Review, American Economic Association, vol. 84(4), pages 992-1044, September.
    45. Erev, I. & Roth, Alvin E., 2014. "Maximization, learning, and economic behavior," Scholarly Articles 30831199, Harvard University Department of Economics.
    46. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 972-990, October.
    47. Alexander Oettl, 2012. "Reconceptualizing Stars: Scientist Helpfulness and Peer Performance," Management Science, INFORMS, vol. 58(6), pages 1122-1140, June.
    48. Jeremy T. Fox, 2010. "Identification in matching games," Quantitative Economics, Econometric Society, vol. 1(2), pages 203-254, November.
    49. Ichniowski, Casey & Shaw, Kathryn & Prennushi, Giovanna, 1997. "The Effects of Human Resource Management Practices on Productivity: A Study of Steel Finishing Lines," American Economic Review, American Economic Association, vol. 87(3), pages 291-313, June.
    50. Robert S. Huckman & Gary P. Pisano, 2006. "The Firm Specificity of Individual Performance: Evidence from Cardiac Surgery," Management Science, INFORMS, vol. 52(4), pages 473-488, April.
    51. Daniel W. Elfenbein & Todd R. Zenger, 2014. "What Is a Relationship Worth? Repeated Exchange and the Development and Deployment of Relational Capital," Organization Science, INFORMS, vol. 25(1), pages 222-244, February.
    52. Denisa Mindruta, 2013. "Value creation in university-firm research collaborations: A matching approach," Post-Print hal-00818682, HAL.
    53. Jan W. Rivkin, 2000. "Imitation of Complex Strategies," Management Science, INFORMS, vol. 46(6), pages 824-844, June.
    54. Jaeyong Song & Paul Almeida & Geraldine Wu, 2003. "Learning--by--Hiring: When Is Mobility More Likely to Facilitate Interfirm Knowledge Transfer?," Management Science, INFORMS, vol. 49(4), pages 351-365, April.
    55. Levinthal, Daniel & March, James G., 1981. "A model of adaptive organizational search," Journal of Economic Behavior & Organization, Elsevier, vol. 2(4), pages 307-333, December.
    56. Eric Van den Steen, 2017. "A Formal Theory of Strategy," Management Science, INFORMS, vol. 63(8), pages 2616-2636, August.
    57. Matthew Bidwell & Shinjae Won & Roxana Barbulescu & Ethan Mollick, 2015. "I used to work at Goldman Sachs! How firms benefit from organizational status in the market for human capital," Strategic Management Journal, Wiley Blackwell, vol. 36(8), pages 1164-1173, August.
    58. Denisa Mindruta, 2013. "Value creation in university-firm research collaborations: A matching approach," Strategic Management Journal, Wiley Blackwell, vol. 34(6), pages 644-665, June.
    59. Robert Gibbons & Rebecca Henderson, 2012. "Relational Contracts and Organizational Capabilities," Organization Science, INFORMS, vol. 23(5), pages 1350-1364, October.
    60. Brian Rubineau & Roberto M. Fernandez, 2013. "Missing Links: Referrer Behavior and Job Segregation," Management Science, INFORMS, vol. 59(11), pages 2470-2489, November.
    61. Milgrom, Paul & Roberts, John, 1990. "The Economics of Modern Manufacturing: Technology, Strategy, and Organization," American Economic Review, American Economic Association, vol. 80(3), pages 511-528, June.
    62. David Tan & Christopher I. Rider, 2017. "Let them go? How losing employees to competitors can enhance firm status," Strategic Management Journal, Wiley Blackwell, vol. 38(9), pages 1848-1874, September.
    63. Claudine Gartenberg & Julie Wulf, 2017. "Pay Harmony? Social Comparison and Performance Compensation in Multibusiness Firms," Organization Science, INFORMS, vol. 28(1), pages 39-55, February.
    64. Ashish Arora & Michelle Gittelman & Sarah Kaplan & John Lynch & Will Mitchell & Nicolaj Siggelkow & Denisa Mindruta & Mahka Moeen & Rajshree Agarwal, 2016. "A two-sided matching approach for partner selection and assessing complementarities in partners' attributes in inter-firm alliances," Strategic Management Journal, Wiley Blackwell, vol. 37(1), pages 206-231, January.
    65. John S. Chen & Pranav Garg, 2018. "Dancing with the stars: Benefits of a star employee’s temporary absence for organizational performance," Strategic Management Journal, Wiley Blackwell, vol. 39(5), pages 1239-1267, May.
    66. Daniel A. Levinthal & Massimo Warglien, 1999. "Landscape Design: Designing for Local Action in Complex Worlds," Organization Science, INFORMS, vol. 10(3), pages 342-357, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Michael J. Leiblein & Jeffrey J. Reuer & Todd Zenger, 2018. "What Makes a Decision Strategic?," Strategy Science, INFORMS, vol. 3(4), pages 558-573, December.
    2. Michael J. Leiblein & Jeffrey J. Reuer & Todd Zenger, 2018. "Special Issue Introduction: Assessing Key Dimensions of Strategic Decisions," Strategy Science, INFORMS, vol. 3(4), pages 555-557, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Arroyabe, M. F. & Hussinger, Katrin & Hagedoorn, John, 2020. "Hiring new key inventors to improve firms' post-M&A inventive output," ZEW Discussion Papers 20-029, ZEW - Leibniz Centre for European Economic Research.
    2. Oyer, Paul & Schaefer, Scott, 2011. "Personnel Economics: Hiring and Incentives," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 20, pages 1769-1823, Elsevier.
    3. Robert S. Huckman & Gary P. Pisano, 2006. "The Firm Specificity of Individual Performance: Evidence from Cardiac Surgery," Management Science, INFORMS, vol. 52(4), pages 473-488, April.
    4. Michael J. Leiblein & Jeffrey J. Reuer & Todd Zenger, 2018. "What Makes a Decision Strategic?," Strategy Science, INFORMS, vol. 3(4), pages 558-573, December.
    5. Ennen, Edgar & Richter, Ansgar, 2009. "The Whole Is More Than the Sum of Its Parts - Or Is It? A Review of the Empirical Literature on Complementarities in Organizations," MPRA Paper 15666, University Library of Munich, Germany.
    6. Jose Uribe & Seth Carnahan & John Meluso & Jesse Austin‐Breneman, 2022. "How do managers evaluate individual contributions to team production? A theory and empirical test," Strategic Management Journal, Wiley Blackwell, vol. 43(12), pages 2577-2601, December.
    7. Jasjit Singh & Ajay Agrawal, 2011. "Recruiting for Ideas: How Firms Exploit the Prior Inventions of New Hires," Management Science, INFORMS, vol. 57(1), pages 129-150, January.
    8. Barlow, Matthew A. & Hesterly, William S. & Cameron Verhaal, J., 2023. "Catching a falling star: Mobility of declining star performers, peer effects, and organizational performance in the National Football League," Journal of Business Research, Elsevier, vol. 165(C).
    9. Bryan Hong & Lorenz Kueng & Mu-Jeung Yang, 2015. "Estimating Management Practice Complementarity between Decentralization and Performance Pay," NBER Working Papers 20845, National Bureau of Economic Research, Inc.
    10. Bryan Hong, 2020. "Power to the outsiders: External hiring and decision authority allocation within organizations," Strategic Management Journal, Wiley Blackwell, vol. 41(9), pages 1628-1652, September.
    11. Matteo Prato & Fabrizio Ferraro, 2018. "Starstruck: How Hiring High-Status Employees Affects Incumbents’ Performance," Organization Science, INFORMS, vol. 29(5), pages 755-774, October.
    12. Michael Waldman, 2012. "Theory and Evidence in Internal LaborMarkets [The Handbook of Organizational Economics]," Introductory Chapters,, Princeton University Press.
    13. Evan Starr & Justin Frake & Rajshree Agarwal, 2019. "Mobility Constraint Externalities," Organization Science, INFORMS, vol. 30(5), pages 961-980, September.
    14. Adina D. Sterling & Roberto M. Fernandez, 2018. "Once in the Door: Gender, Tryouts, and the Initial Salaries of Managers," Management Science, INFORMS, vol. 64(11), pages 5444-5460, November.
    15. Di Lorenzo, Francesco & Almeida, Paul, 2017. "The role of relative performance in inter-firm mobility of inventors," Research Policy, Elsevier, vol. 46(6), pages 1162-1174.
    16. Kremena Slavova & Andrea Fosfuri & Julio O. De Castro, 2016. "Learning by Hiring: The Effects of Scientists’ Inbound Mobility on Research Performance in Academia," Organization Science, INFORMS, vol. 27(1), pages 72-89, February.
    17. Bryan Hong & Lorenz Kueng & Mu-Jeung Yang, 2019. "Complementarity of Performance Pay and Task Allocation," Management Science, INFORMS, vol. 65(11), pages 5152-5170, November.
    18. Jongsoo Kim & Richard Makadok, 2023. "Unpacking the “O” in VRIO: The role of workflow interdependence in the loss and replacement of strategic human capital," Strategic Management Journal, Wiley Blackwell, vol. 44(6), pages 1453-1487, June.
    19. Argote, Linda & Fahrenkopf, Erin, 2016. "Knowledge transfer in organizations: The roles of members, tasks, tools, and networks," Organizational Behavior and Human Decision Processes, Elsevier, vol. 136(C), pages 146-159.
    20. Varshney, Mayank & Jain, Amit, 2023. "Technology acquisition following inventor exit in the biopharmaceutical industry," Technovation, Elsevier, vol. 126(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:orstsc:v:3:y:2018:i:4:p:668-682. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.