Weiyi Ng and Eliot L. Sherman. "In Search of Innovation: External Hiring, Internal Mobility, and Intrapreneurship." Revise and resubmit at Organization Science.
The practice of external hiring continues unabated, despite growing evidence that its costs often exceed its returns. In view of this, we consider whether external hiring provides value to firms that prior research has not captured: Namely, greater opportunity for intrapreneurship. Consistent with studies that emphasize knowledge recombination as a key antecedent of innovation, we theorize that external hires are at greater risk of intrapreneurship than equivalent internal hires. We test our intuition via a study of product managers in large technology companies. We use machine learning to operationalize intrapreneurship as the semantic similarity between product managers’ description of their work and the founding statements of venture-backed technology entrepreneurs. Our identification strategy relies on coarsened exact matching to optimize covariate balance between product managers externally hired—versus internally promoted—into their roles. The results of our analysis indicate that externally hired product managers are substantially more intrapreneurial than observably equivalent product managers promoted from within. However, and consistent with prior research, we find that external hires have a higher turnover rate, an effect that is amplified for particularly intrapreneurial external hires. This suggests that relying on external hires to catalyze intrapreneurship may be a challenging long-term strategy to sustain.