Small World Network and Learning After Hiring

Abstract

This research aims to advance the understanding of learning after hiring by investigating the effect of intra-firm network structure on learning patterns in a post-hiring context. Right after a new hire moves to the hiring firm, both the new hires and the incumbent inventors in the hiring firm learn from each other. The new hires choose pieces of knowledge to recombine from the hiring firms’ prior knowledge (new hire absorption), and at the same time, incumbent inventors choose pieces of knowledge to recombine from the new hires’ prior knowledge (incumbent absorption). I study how the small world network structure shapes differently these two types of learning. Using the patent data in the US between 1980 and 2015, I find that a small-world network structure facilitates incumbent absorption, while it impedes new hire absorption. The effect is more significant in discrete industries than in complex ones, suggesting that it is in these areas where information efficiency plays a key role in knowledge integration after poaching a new employee.