Managerial Human Capital and External Mobility: A Signaling Perspective

Abstract

Managerial human capital is a valuable organizational resource comprising individual-level capacities that draw upon and leverage the knowledge, skills, abilities, and other characteristics (KSAOs) gained by employees both before and after promotion to managerial positions. While all organizations need strategically valuable managerial human capital, asymmetrical information in external labor markets creates uncertainty when firms look to hire individuals who can develop and/or provide these capacities. In contrast, internal labor markets, with the unique insights they have on current employees, are better equipped to assess workers’ managerial potential and competencies. As a result, an individual’s career outcomes in their current organization signal important information about their managerial human capital to hiring firms. In this paper we explore how signals sent by an individual’s time to first managerial promotion and time in managerial roles relate to their external mobility. We argue that there are nuanced and sometimes countervailing demand- and supply-side theoretical mechanisms that result in inverted U-shaped associations between these signals of managerial human capital and external mobility. We test our theory using complete career histories from a unique longitudinal and population-level dataset of 2,079 professionals employed in the scouting operations of Major League Baseball franchisees from 1988 to 2010. In addition to contributing to our understanding of signals and external mobility, the results of our logistic discrete-time event history analysis inform broader discussions concerning firm-specific human capital resources and provide new insights on the unique challenges associated with managerial human capital selection.