Should Firms Move Talent from the Geographic Periphery to Hubs? A Strategic Human Capital Perspective

Prithwiraj  Choudhury; Victoria  Sevcenko; Tarun   Khanna

Working Paper | HBS Working Paper Series | 2020

Should Firms Move Talent from the Geographic Periphery to Hubs? A Strategic Human Capital Perspective

by Prithwiraj Choudhury, Victoria Sevcenko and Tarun Khanna

Abstract

A longstanding literature holds that firms should hire and move talent from the geographic periphery to hubs as a means to create value from human capital. They do so, however, at the risk of losing the worker to rivals located in the same geographic hub, limiting their ability to capture value in this way. Our study explores both value creation and capture from hiring workers from the periphery and moving them either to headquarters or a peripheral location. We estimate the human capital rents accruing to the firm, i.e., the value created net of recruitment, training, and turnover costs. A unique dataset compiled from a large Indian technology firm allows us to exploit the randomized assignment of workers to headquarters and other peripheral locations to provide robust econometric estimates. We find that workers hired in small town locations and moved to headquarters exhibit higher turnover to competitors but also slightly improved performance, compared to being deployed in peripheral locations. In sum, back-of-the-envelope calculations suggest that net rents from human capital are similar whether new recruits from smaller towns are assigned to headquarters or peripheral locations. This suggests that moving workers hired from the periphery to production centers in peripheral locations might be an alternative to moving workers from the periphery to the hub. Fine-grained data of optional career development courses completed by workers shed light on the mechanisms. Our results contribute to the literatures on firms and migration, creating and capturing value from human capital, and worker turnover.

Keywords: Geographic Location; Selection and Staffing; Employment; Residency; Technology Industry; India;

Language: English

Format: Print

46 pages

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Citation:

Choudhury, Prithwiraj, Victoria Sevcenko, and Tarun Khanna. "Should Firms Move Talent from the Geographic Periphery to Hubs? A Strategic Human Capital Perspective." Harvard Business School Working Paper, No. 14-080, February 2014. (Revised August 2020.)

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Should Firms Move Talent from the Geographic Periphery to Hubs? A Strategic Human Capital Perspective

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