Abstract:This paper examines the conditions under which employee referrals serve as a screening function when there is a conflict of interest between the firm and the current employees concerning referral recruitment. In particular, I consider two potential mechanisms that lead to a conflict of interest: the employee’s social connection with the applicant and her promotion prospects. Specifically, I posit that the employee will have an incentive to refer low‐ability applicants if she has a strong social connection with… Show more
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