Alumni effects and relational advantage: The impact on outsourcing when a buyer hires employees from a supplier's competitors

Research examining the impacts of employee mobility on interfirm relationships suggests that firms earn positive "relational spillovers" when their former employees, or alumni, depart to join other organizations. Drawing on the theory of relational advantage, we extend this line of work by examining how a supplier firm is affected when a buyer hires alumni from the supplier's competitors. Using detailed data on mobility involving patent law firms and their Fortune 500 clients, we find that supplier firms receive less outsourced business when buyers hire employees from the focal supplier's competitors. Further, this negative effect decreases when the focal supplier has its own alumni already working for the buyer firm and increases when the buyer firm has higher turnover or hires locally from competing suppliers. The article thus underscores the importance of firm alumni in the competition for valuable business relationships and highlights a form of "talent war" waged through the placement of and relationships with former employees.