2024-11-1020221463-678610.1111/manc.123892-s2.0-85118640696http://dx.doi.org/10.1111/manc.12389https://hdl.handle.net/20.500.14288/16792This 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.EconomicsJournal Article1467-9957715976000001Q32309