Formal Search and Referrals From a Firm's Perspective

Abstract

We explore the relationship between firms' characteristics and recruitment strategies. We present a theoretical search model with two search channels: a costly formal channel and a costless informal channel (referrals). We empirically test the model predictions and find that: larger firms search more formally; firms search more formally for high-skilled workers; the positive relationship between firm's size and formal search intensity also holds for firms not using referrals; firms using referrals invest less into formal search compared to firms not using referrals; larger firms hire less often by referrals than smaller firms; and larger search effort leads to more applicants.

Immigration, social networks and occupational mismatch

“…In addition, jobs in smaller companies are more frequently filled via social networks. This result is inline with the recent evidence in Rebien et al (2017) using German firm-level data.…”

Heterogeneity in firms’ recruitment practices: New evidence from representative employer data

“…These structural variables should not be influenced by an establishment’s recruitment strategy and have usually been applied in prior research (e.g. Bloom and Van Reenen, 2007; DeVaro, 2005; Rebien et al, 2020). 5 We only consider independent variables which are more or less time-invariant, that is, variables a firm decides to use in the long run or prior to or independent from its decision on hiring strategies.…”

The Dynamics of Referral Hiring and Racial Inequality: Evidence from Brazil

“…We assume that these costs are fixed relative to a firm's number of vacancies n. Hence, larger firms, or those with more vacancies, invest more in screening precision and have a lower value of h E . While this assumption is not essential to generating the key predictions of the model, we include it to match the stylized fact that large employers use more formal recruiting and screening methods and find a smaller share of their hires via referral (Holzer, 1987a;Marsden, 1994;Rebien et al, 2020). Morgan and Várdy (2009) show that if the firm is sufficiently selective (meaning q * is sufficiently large), then an increase in a group's signal precision will increase the group's share of hires.…”

“…Following much of the literature (Topa, 2019), we also assume that a job seeker's match-specific productivity is more uncertain when they are matched to the firm via the external market. To match the observation that large employers invest more in formal hiring methods and find a smaller share of their hires via referral (Barron et al, 1987;Holzer, 1987a;Marsden, 1994;Rebien et al, 2020), we further suppose that the firm can invest in a (fixed cost) recruitment and screening technology that reduces the relative uncertainty associated with external market candidates.…”