It’s difficult to tell from an application or interview if somebody will succeed, so firms often default to referrals and direct industry experience. They want to reduce uncertainty any way they can, and the way it plays out in the job market places people switching industries at a big disadvantage, says a new study. Firms, particularly small and less prestigious ones, are just highly cautious.
The data, from a new NBER working paper by UNC professor Camelia Kuhnen and Stanford’s Paul Oyer, is particularly meaningful because it comes from MBA graduates. That’s a degree that many people get explicitly to switch careers, so the fact that regardless, employers prioritize prior experience says a lot about their attitude.
In fact, employers explicitly look for certainty about productivity and fit in their new hires. The data is divided by level of uncertainty. Narrow experience in a firm’s industry indicates a low degree of uncertainty about their productivity and fit, broad experience a medium amount, and someone with no experience is labeled high. Candidates without fairly narrow industry experience lose out:
Chance of Job Offer, by Uncertainty Level
Put another way, here are the odds when you compare applicant types against each other. A score of “1” would indicate no preference for one type versus the other: