!DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Strict//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-strict.dtd"> Streamline Training & Documentation: Lose an Employee, Gain an Alum

Friday, March 21, 2008

Lose an Employee, Gain an Alum

In the knowledge economy, firms that encourage alumni to stay in touch, rather than obsessing over ensuring that employees and ex-employees protect proprietary information, are arguably strengthening their ability to innovate successfully.

What's the evidence? Research by Lori Rosenkopf (Wharton professor of management) and Rafael A Corredoira (Wharton PhD), described briefly in the April issue of the Harvard Business Review, but available as a working paper (pdf) since May 2006, indicates that when a high-tech professional switches companies, not only does his/her knowledge and skill go to the new firm, but also there is likely a reverse flow of knowledge back to the old firm.1

The reverse flow of knowledge is probably due to one or both of these mechanisms:
  • Social networking — The emplyee stays in touch with colleagues at his/her old firm.

  • Spotlight on the new firm — The old firm begins paying more attention to what the new firm is doing.
The data Rosenkopf and Corredoira used was patent citations in the semiconductor industry in the period 1985-1995, specifically,
  • the frequency with which the patent applications of an employee's old firm cited patents of the employee's new firm

  • vs.

  • the frequency of citations of patents of all other firms
Rosenkopf and Corredoira found that
after an inventor moves to a new firm in a different region or country, subsequent patents from the inventor's old firm are 36% more likely to cite patents granted to people at the inventor's new firm than to cite patents granted to people at other comparable companies. In effect, the old firm gains knowledge from the new firm. However, this phenomenon is not evident for inventors who move within the same U.S. metropolitan region or the same foreign country. That's probably because in those circumstances, the old company and the new firm are likely to have other existing ties, such as shared customers, suppliers,and acquaintances.
Note that the Rosenkopf/Corredoira results pertain specifically to high-tech firms and do not look beyond patent citations to financial impacts. In other words, though it is clear that the citations of patents at firms to which employees have moved are higher than the average for all firms, it is not clear whether this pays a financial dividend.

1 Knowledge@Wharton published a summary of the Rosenkopf/Corredoira working paper here.

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