According to the previous literature on hiring, ?rms face a trade-off when deciding on external recruiting: From an … incentive perspective, external recruiting is harmful since admission of external candidates reduces internal workers’ career … same product market, weaker ?rms use external recruiting and their wage policy to offset their competitive disadvantage. …

External recruiting at least weakly improves the quality of the pool of applicants, but the incentive implications are … less clear. Using a contest model, this paper investigates the pure incentive effects of external recruiting. Our results … discouragement of low ability workers, the firm will benefit from external recruiting. If, however, the discouragement effect …