Starstruck: How Hiring High-Status Employees Affects Incumbents’ Performance

Abstract

This study investigates the effects of high-status inbound mobility on the performance of incumbents. Leveraging sociological theory on status, we suggest that highstatus newcomers generate only limited knowledge spillovers compared to the resources they drain from incumbents. Building on this mechanism, we formulate our first hypothesis that hiring stars negatively affects incumbents' performance. We argue that this effect is asymmetric across incumbents. Because high-status incumbents can better cope with the shock in the internal allocation of resources produced by high-status newcomers, we expect that they will experience a lower performance decline than low-status incumbents. We test our hypotheses by studying the change in recommendation profitability of incumbent securities analysts experiencing inbound mobility events in the period 1996-2007. Our results show that the higher the status of the hired analyst, as captured by the Institutional Investor ranking history, the greater the decline in the incumbent analyst's recommendation profitability, and that this decline is moderated by the status of the incumbent analyst.

Shining with the Stars? Unearthing how group star proportion shapes non‐star performance

“…Research has suggested that working with high‐performing stars increases non‐star performance (cf. Azoulay, Graff Zivin, & Wang, 2010; Oettl, 2012), shown how stars can harm non‐star performance, casting stars as unwilling to share resources, cooperate, or make joint decisions (Groysberg, Polzer, & Elfenbein, 2010; Overbeck, Correll, & Park, 2005; Prato & Ferraro, 2018), and highlighted that the effect of high performers on non‐star performance may be contingent on non‐star attributes (Downes, Crawford, Seibert, Stoverink, & Campbell, 2020).…”

Red Giants or Black Holes? The Antecedent Conditions and Multilevel Impacts of Star Performers

“…Additionally, if the performance level of stars seems utterly unachievable to others, non-stars may choose to put little or no effort into closing the performance gap (Brown, 2011). Due to their high, broad status, stars are likely to attract substantial organizational resources, since that is often a central rationale in hiring stars (Prato & Ferraro, 2018). By attracting and controlling key organizational resources (Kehoe & Tzabbar, 2015;Zucker et al, 2002), stars and their respective organizations may discount innovative contributions by other individuals (Asgari & Hunt, 2015).…”

“…This effect is especially toxic if there is a gap between status and quality of the performance (Kim & Kang, 2014;Merton, 1968), since high status actors enjoy access to higher budgets, better resources, and more opportunities for recognition (Asgari & Hunt, 2015;Merton, 1968). Prato and Ferraro (2018) showed that new hires actually have a negative impact on incumbents' performance due to limited knowledge spillovers and a significant drain on incumbent resources. Similarly, Agrawal, McHale, and Oettl (2017) showed that hiring stars negatively impacts the performance of incumbents in unrelated fields.…”

“…Assumes all reflective dimensions are independently identical. Prato & Ferraro (2018) Using the All-America Research Team ranking, they identified stars as those who were ranked in the top three industry performers when they were hired.…”

“…Signaling theory (Connelly et al, 2011) • Increase legitimacy of inventor team and patent renewal (Luo et al, 2009) • Provide network connections and recognition (Graffin et al, 2008) • Sponsor individuals through networks (Allen et al, 2004) • Hinder teams from enhancing skills and information of peers because of power imbalance (Kehoe & Tzabbar, 2015) • Negative impact on innovative outcomes because of imbalance in mutual dependence (Kehoe & Tzabbar, 2015) • Hinder non-stars knowledge sharing because of high perceived value of stars' knowledge and low perceived value of non-stars' knowledge (Van der Vegt et al, 2010) • Cause disruptions on knowledge sharing routines because of status asymmetry (Tzabbar & Vestal, 2015) • Limited knowledge spillover of new hires to incumbent employees (Prato & Ferraro, 2018)…”