The Influence of Expert Ratings on Job Seekers' Choices
Job seekers would apply to higher-quality startups if they had access to better information about their business models and underlying science, Kevin A. Bryan, Mitchell Hoffman, and Amir Sariri find in Information Frictions and Employee Sorting between Startups (NBER Working Paper 30449).
When the researchers provided job seekers on a custom job board with expert ratings of the business model quality and underlying science viability of 26 science-based startups, job seekers were 29 percent more likely to apply to a startup with an above median business rating and 12 percent more likely to apply to one with an above median science rating than seekers who saw only descriptions of available jobs.
Negative ratings also affected application choices. Job seekers were 12 percent less likely to apply to a startup with a below median business rating and 24 percent less likely to apply to one with a below median science rating.
When no expert evaluations were provided to job seekers, above median firms received 11 percent more applications than below median firms. When evaluations were provided, top firms got 82 percent more.
The shift in applications was clearest among the startups rated highly by experts on both business and science quality. While these startups were 11 percent more likely than startups with below-median business model and science quality to receive applications from job seekers who saw only the job descriptions, they were 82 percent more likely to receive applications from those who also saw the expert ratings.
These findings resulted from a randomized controlled trial, launched by the researchers in 2019, that used a custom-built job board for startups participating in a prestigious, nine-month science-based entrepreneurship program (SEP) that mentors science-based startups. They invited alumni of two business schools to view the SEP job board and to rank and apply to jobs that caught their interest. All of the alumni were presented with job descriptions provided by the startups. Some were also provided with ratings of “above median” or “below median” for each startup’s business plan and/or underlying science. The business ratings were provided by SEP staff who specialize in evaluating startups while the science ratings were provided by senior research scientists who specialize in the startups’ technical fields.
The findings show that job seekers prefer to apply to the startups most likely to succeed in the near term, whether that means expanding rapidly, attracting investment, or launching an IPO. However, the findings also suggest that even highly skilled applicants for startup jobs lack the information needed to accurately assess the likelihood of startup success.
The researchers also assessed the accuracy of the expert ratings. Startups rated highly by business and science experts were more likely than those with lower ratings to complete the SEP incubator program and to raise subsequent funding. Three years later, the highly rated firms were also more likely to still be in business, to have raised significant additional funding, and to have significantly expanded their workforce.