Publication: Monetary rewards in employee referral programs
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Embargo Status
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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 them or if she faces the possibility of competing against her own referral to earn a promotion at the firm. Taking these potential sources for conflicting interests, I investigate the extent to which the firm can make use of financial incentives (fixed fees and bonuses) to align incentives of the employee with those of the firm.
Source
Publisher
Wiley
Subject
Economics
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Has Part
Source
Manchester School
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DOI
10.1111/manc.12389