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Despite what conventional wisdom suggests, large, prestigious companies are more likely to take the risk of hiring candidates without industry experience than smaller start-up companies.
A paper published by the National Bureau of Economic Research documenting the MBA hiring market found that for full-time employment, candidates with experience had a 3.75 times higher chance of being hired by smaller or non-prestigious companies compared to candidates without experience. In prestigious companies, they only stood a 1.74 times better chance of being hired.
The researchers based their study on the labour market analysis for students pursuing a two-year full-time MBA programme based in the US. It identified names of prestigious companies using Fortune MBA 100 annual rankings during 2007-2009.
“We find that firms prefer to make offers to candidates characterised by low uncertainty – namely, those individuals who have worked in the firms’ industry,” noted the report.
The study found that hiring decisions are in part driven by the adjustment costs that a company is likely to suffer in the event of a wrong hire. That implies, that larger, more prestigious organisations receive numerous applications from candidates, which makes their job of filling a vacancy easier.
On the other hand, not only are smaller, less prestigious firms more likely to receive less job applications than their more prestigious counterparts, but they are likely to be lacking in resources needed to replace a failed hire.
As a result, they are more likely to opt for candidates with a better industry fit or experience, in a bid to avoid high firing and replacement costs.
However, there is still hope for job applicants looking to break into new industries. It is found that equal opportunity is given to both fresh and experienced candidates when it comes to temporary employment such as internships and contract employment.
The study identified a potential hire’s productivity on three attributes – general ability, skill and interest match, and how well a candidate fits into a firm’s strategies and company culture.
While general ability could be seen from an applicant’s grades, the other two attributes could be studied through the course of temporary employment.