Working Paper Series no. 723: Professional Networks and their Coevolution with Executive Careers

How important are professional networks in the evolution of an individual’s career? Substantial evidence has accumulated in recent years that networks are associated with professional advancement but causality has been difficult to establish. This is because, possibly, more dynamic individuals may both develop larger networks and have successful careers, even if networks did not contribute to their professional advancement. Moreover, the various channels though which networks can help career progression are difficult to disentangle. Is it because a large network of professional contacts might be helpful in generating new contracts or in facilitating transactions with suppliers and therefore might be rewarded by the employer through higher salaries or promotion? Or is it because a large network of professional contacts facilitates an individual’s mobility through access to a larger number of job opportunities?

This paper uses a dataset on the career of nearly 73 000 executives in over 10 000 European and North American companies to investigate these questions. We build a model of career progression which incorporates the two types of mechanism by which networks of professional contacts might contribute to the development of executives’ careers: they are valuable for the employer and they facilitate job mobility. Our empirical results suggest a substantial positive correlation between network size and executive compensation but this correlation is almost entirely due to individual characteristics. The global impact of networks on compensation is relatively small and is driven by the enhanced probability of moving to a higher-paid job. Overall, professional networks appear to have been over-hyped as determinants of executives’ professional success.