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Why a Career is Hard if You Don't Change Firm

, by Claudio Todesco
An experiment conducted by Arnaldo Camuffo, Ekaterina Netchaeva and Federica De Stefano highlights the tendency to hire external candidates even if the position requires firm specific human capital

A few months ago, a brilliant MBA student told his story to Arnaldo Camuffo, director of the PhD program in Business Administration and Management. He was perfectly qualified to replace his boss, yet the company hired an external job applicant. Theory predicts the opposite: when a vacant position requires a firm-specific human capital, HR directors should tend to promote someone who's already working in the company. Why it didn't happen in this particular case?

Camuffo, the assistant professor Ekaterina Netchaeva and the PhD student Federica De Stefano tried to answer by studying decision biases in staffing processes. They used the online survey software Qualtrics to test the theory on 150 international HR directors found on LinkedIn; 150 Italian HR directors recruited thanks to the AIDP (Associazione Italiana per la Direzione del Personale); 100 MBA students; 300 undergraduate students (the latter were involved in the pilot study). Every research participant was randomly assigned to the experimental or the control group. Each one played the role of an HR director who had to choose between two candidates – one internal, the other external – for the Senior Scientist and the Chief Financial Officer positions. Only the treatment group was told that the position required knowledge of corporate culture and information systems devoleped by the company.

The experiment is still going on, but Camuffo and his staff already have the first results. There's no statistically significant difference between the experimental and the control group. "Which is the bias?", Camuffo asks. "We're working on two hypotheses: it could be the 'grass is always greener on the other side' effect which means we idealize professionals who work outside our company, or the cliff effect, meaning we look outside for help when in crisis".

The final results will be published in October. A preview (The Effect of Firm-specific Human Capital on Staffing Decisions: An Experimental Approach) was disclosed last May at the Industry Studies Association annual conference in Kansas City, U.S.

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