Employee Mobility and Interfirm Relationship Transfer: Evidence from the Mobility and Client Attachments of United States Federal Lobbyists, 1998–2014

• DOI: http://doi.org/10.1002/smj.2634
• Date: 01 October 2017
• Author: Joseph Raffiee
• Published date: 01 October 2017

Strategic Management Journal

Strat. Mgmt. J.,38: 2019–2040 (2017)

Published online EarlyView 15 February 2017 in WileyOnline Library (wileyonlinelibrary.com) DOI: 10.1002/smj.2634

Received 28 December 2015;Final revision received21 December 2016

Employee Mobility and Interfirm Relationship

Transfer: Evidence from the Mobility and Client

Attachments of United States Federal Lobbyists,

1998– 2014

Joseph Raffiee*

Department of Management and Organization, Marshall School of Business,

University of Southern California, Los Angeles, California

Research summary: Employee mobility can erode competitive advantage by facilitating interrm

knowledge and relationship transfer. This study investigates the latter and identies factors that

inuence the likelihood of its occurrence. Using a novel database that tracks the employment

and client attachments of U.S. federal lobbyists, I show that repeated exchange with employees

(rms) increases(decreases) the likelihood clients follow employees who switch rms. Structurally,

multiplexity reduces the likelihood of client transfer and weakens the effect of employee–client

repeated exchange, with the multiplexity effect strongest when team members have specialized

expertise. By examining the main and interactive effects of repeated exchange, multiplexity,

and specialized human capital, this study extends prior work by demonstrating how individual,

organizational, and structural relationship characteristics affect client transfer and retention

ex-post employee mobility.

Managerial summary: When do clients follow employees who switch rms? What can rms do

to guard against it? These questions are important in service-based industries whereclients may

become loyal to individual employees within the rm rather than to the rm itself. This study

provides evidence that helps practicing managers: (a) identify which clients are most at risk of

defecting if employees exit, and (b) structure relationships in ways that mitigate the likelihood

that employee exit results in client loss. Findings suggest that a client is more likely to defect

when she has extensive history working with the exiting employee, particularly if the employee

was the sole link between the client and rm. Managers, however, can reduce the risk of client loss

following employee exit by structuring relationships so that clients work with teams of employees

rather than exclusively with an individual and by increasing the degree of specialization within

these teams. Copyright © 2017 John Wiley & Sons, Ltd.

Introduction

Human assets have long been recognized as

a promising source of competitive advantage

(Campbell, Coff, & Kryscynski, 2012; Hatch

& Dyer, 2004). Yet sustaining these advantages

Keywords: client relationships; employee mobility;

human capital; multiplexity; specialization

*Correspondence to: Joseph Rafee, Department of Management

and Organization, Marshall School of Business, University of

Southern California, 701 Exposition Blvd., HOH 512, Los Ange-

les, CA 90089. E-mail: joe.rafee@marshall.usc.edu

Copyright © 2017 John Wiley & Sons, Ltd.

is challenging (Coff, 1997), because employee

mobility often results in the interrm transfer

of valuable knowledge to rival rms (Agarwal,

Ganco, & Ziedonis, 2009). Employee mobility

may also lead to the interrm transfer of valuable

stakeholder relationships, for example, relation-

ships with clients, customers, suppliers, and other

market actors (Carnahan & Somaya, 2013; Dokko

& Rosenkopf, 2010). However, while employee

mobility and interrm knowledge transfer has

received signicant scholarly attention (e.g., Agar-

wal et al., 2009), we know much less about the

2020 J. Rafee

conditions under which employee mobility leads

to the interrm transfer of relationships or what (if

anything) rms can do to reduce the likelihood of

its occurrence (Sorenson & Rogan, 2014).

In this article, I contribute to this literature by

examining when employee mobility leads to inter-

rm client transfer in the context of professional

services rms. Client transfer differs fundamentally

from knowledge transfer in that the latter is often

nonrivalrous and nonexcludable, while the former

has agency and makes transfer choices. Accord-

ingly, prior work examining the conditions that

lead to knowledge transfer may not easily translate

to client transfer, as client transfer presents its own

unique set of challenges.1I begin by theoretically

arguing that employee– client and rm–client rela-

tionships are interrelated but distinct (cf. Broschak

& Block, 2014) and empirically show that the like-

lihood a client follows an employee who switches

rms increases with repeated exchange between the

employee and client, but decreases with repeated

exchange between the client and rm. When

relationships are structured as multiplex (clients

served by a team), however, clients will develop

multiple employee– client relationships within the

rm, reducing reliance on any specic employee.

Accordingly, I hypothesize and nd that multiplex-

ity signicantly reduces the likelihood that mobility

leads to client transfer, while also weakening the

effect associated with employee– client repeated

exchange. By doing so, my study responds to

recent calls urging scholars to investigate “the

role that multiplex ties play in the retention of

clients” (Rogan, 2014, p. 580). I extend this logic

further to argue that the efcacy of multiplex

relationship structures will vary with the human

capital characteristics of multiplex team members.

Drawing from the labor market specialization

literature (Ferguson & Hasan, 2013), I theorize and

nd that the strength of the multiplexity main effect

increases when teams are comprised of specialists

rather than generalists, consistent with the theo-

retical argument that increased specialization and

1Prior work has also shown that managerial mobility can

lead to the general dissolution of client ties (Broschak, 2004;

Broschak & Block, 2014). However, it thus far remains unclear

if (or when) defecting clients “follow the individuals leaving the

organizations” (Sorenson & Rogan, 2014: p. 272), in part due to

empirical difcultiesdisaggregating employee –lient relationships

from rm– client relationships. This limitation has important

theoretical and practical implications because the competitive

ramications of resource transfer are distinct from resource

depletion (Agarwal, Campbell, Franco, & Ganco, 2016).

division of labor in team production of products

and services increases the difculty and perceived

ability for an individual employee to replicate

the production of value without his or her team

(Liebeskind, 1996).

I test my hypotheses using data on the inter-

rm mobility of U.S. federal lobbyists. To over-

come the inherent data challenges that have plagued

scholars conducting empirical work in this area, I

exploit the stringent reporting requirements man-

dated by the Lobbying Disclosure Act of 1995

and Honest Leadership and Open Government Act

of 2007 that require all lobbying activity to be

reported via lobbying disclosure reports to the Sen-

ate Ofce of Public Records. I use these reports to

construct a novel database that tracks the employ-

ment and client attachments of all registered lob-

byists between 1998 and 2014. Analysis of these

data— including econometric corrections for selec-

tion and numerous xed-effects regressions that

help account for lobbyist, rm, client, and des-

tination rm unobserved heterogeneity— provide

robust support for my theory.

This article contributes to the growing litera-

ture on strategic human capital (Bidwell, Won,

Barbulescu, & Mollick, 2015; Lecuona & Reitzig,

2014; Rafee & Coff, 2016) and complements

extensive work on interrm knowledge transfer

(e.g., Franco & Filson, 2006) by theoretically

identifying conditions that facilitate interrm

relationship transfer. By doing so, this study adds

empirical insights to the employee mobility litera-

ture by disentangling what is transferred through

mobility (i.e., clients) from who is transferred

through mobility (i.e., the employee[s]), a rarity

in extant work, despite the prevalence of theoret-

ical arguments in the mobility literature alluding

to client transfer and its strategic importance

(Campbell, Ganco, Franco, & Agarwal, 2012;

Phillips, 2002; Wezel, Cattani, & Pennings, 2006).

My ndings have signicant and widespread

economic implications, particularly in the context

of professional services, a crucial and substantial

component of the U.S. economy that contributed

more than $2.2 trillion (∼20%) to the U.S. gross

domestic product and was the leading source of

U.S. private sector employment in 2011 (USITC

Publication 4412). By examining the main and

interactive effects of repeated exchange, multi-

plexity, and specialized human capital, this study

empirically shows how individual, organizational,

and structural relationship characteristics affect

Copyright © 2017 John Wiley & Sons, Ltd. Strat. Mgmt. J.,38: 2019–2040 (2017)

DOI: 10.1002/smj