Article | American Economic Review: Papers and Proceedings | 2011

Isolating the Symbolic Implications of Employee Mobility: Price Increases after Hiring Winemakers from Prominent Wineries

by Peter W. Roberts, Mukti Khaire and Christopher I. Rider

Abstract

When a skilled employee moves from one organization to another, the effects on the hiring organization can be substantive (i.e., changes in actual outcomes) and symbolic (i.e., changes in expectations or valuations and therefore prices). We theorize that strong or even purely symbolic effects can materialize when former employers are highly prominent because these hires increase the hiring organization's market visibility. Leveraging an idiosyncratic feature of wine markets (i.e., the variable time lag between a wine's production and its release to the market), we isolate an effect of winemaker mobility on wine prices that is not accompanied by a substantive effect on quality. Within-winery analysis of 65 wineries' wines released before and after a hiring event reveal that hiring a winemaker from a more prominent winery negligibly influences wine quality but positively influences wine prices—even for wines that were produced and bottled prior to the new winemaker's arrival. In the absence of substantive justification (i.e., increased quality), the hiring wineries appear to be basking in the reflected glory of their prominent affiliations when setting prices. Implications for research on the substantive and symbolic effects of inter-organizational affiliations are discussed.

Keywords: Employees; Organizations; Performance Expectations; Price; Competency and Skills; Quality; Management Analysis, Tools, and Techniques; Selection and Staffing; Valuation; Food and Beverage Industry;

Citation:

Roberts, Peter W., Mukti Khaire, and Christopher I. Rider. "Isolating the Symbolic Implications of Employee Mobility: Price Increases after Hiring Winemakers from Prominent Wineries." American Economic Review: Papers and Proceedings 101, no. 3 (2011): 147–151.