The Promotion Dynamics of American Executives

Abstract

Dans ce papier, nous estimons un modèle dynamique de promotion où la notion d'effet causal (causal fast track) est différenciée de la notion non-causale (spurious fast track). La probabilité de promotion est fonction du niveau hiérarchique dans la firme, des attributs observables et non observables des individus, des attributs observables (et dynamiques) de la firme (tels que les profits et la taille), ainsi que de l'historique (endogène) des promotions passées mesuré par la rapidité moyenne de promotion. Le modèle est appliqué à un échantillon de 30 000 cadres du secteur privé américain, travaillant pour plus de 380 grandes firmes. Les résultats indiquent que le processus aléatoire générant les promotions dépend faiblement du niveau de capital humain, et très peu de la vitesse passée, mais beaucoup plus des facteurs non observables tels que la motivation. Les résultats montrent également qu'il y a une large dispersion dans l'effet de la vitesse de promotion sur les promotions futures. Bien que l'effet soit positif en moyenne, il est négatif pour une sous-population. De façon générale, l'effet de la vitesse passée décroît avec le niveau de capital humain et l'ancienneté dans la firme. L'effet négatif de la vitesse de promotion est compatible avec le "principe de Peter", souvent mentionné dans la littérature sur la dynamique des promotions.

We formulate an empirical model of promotion with dynamic selfselection where the current promotion probability depends on the hierarchical level in the firm, individual human capital, unobserved (to the econometrician) individual specific attributes, time varying firm specific variables (firm size and profits) as well as endogenous past promotion histories. We examine the causal effect of previous promotion histories (as measured by realized speed of promotion) on future promotion outcomes. The model is fit on an 8 year panel of promotion histories of 30,000 American executives employed in more than 380 different firms. The stochastic process generating promotions is weakly correlated with standard human capital endowment variables (age, schooling and tenure). It may be viewed as a series of promotion probabilities which become smaller as an individual moves up in the hierarchy and is primarily explained by individual (or firm) specific factors other than measured human capital. We also find that, conditional on unobservables, the promotion probability is only mildly enhanced, on average, by the speed of promotion achieved in the past (a structural fast track effect). However, we find the existence of a relatively high cross-sectional dispersion in the effect of past promotion histories and we are able to provide an explanation for this relatively high dispersion. In general, the magnitude of the individual specific effect of achieved speed of promotion is inversely related to accumulated human capital (schooling and tenure). We believe that these findings are consistent with the hypothesis that the signaling aspect of past promotions is stronger for those who are less educated and stronger for those who are relatively new in a firm. We also find that a negative correlation between current promotion and past speed of promotion cannot be ruled out for a portion of the population, and we are able to relate this finding to the "Peter Principle".