The value of hiring through employee referrals

Stephen V. Burks, Bo Cowgill, Mitchell Hoffman, Michael Housman

    Research output: Contribution to journalArticlepeer-review

    54 Scopus citations

    Abstract

    Using personnel data from nine large firms in three industries (call centers, trucking, and high-tech), we empirically assess the benefit to firms of hiring through employee referrals. Compared to nonreferred applicants, referred applicants are more likely to be hired and more likely to accept offers, even though referrals and nonreferrals have similar skill characteristics. Referred workers tend to have similar productivity compared to nonreferred workers on most measures, but referred workers have lower accident rates in trucking and produce more patents in high-tech. Referred workers are substantially less likely to quit and earn slightly higher wages than nonreferred workers. In call centers and trucking, the two industries for which we can calculate worker-level profits, referred workers yield substantially higher profits per worker than nonreferred workers. These profit differences are driven by lower turnover and lower recruiting costs for referrals.

    Original languageEnglish (US)
    Article numberqjv010
    Pages (from-to)805-839
    Number of pages35
    JournalQuarterly Journal of Economics
    Volume130
    Issue number2
    DOIs
    StatePublished - May 1 2015

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