November 01, 2019 | By Russell Weinstein
TAGS: graduate outcomes, trends and predictions, journal, employer relations
NACE Journal, November 2019
Why do post-graduation employment outcomes differ across universities, even among those of similar selectivity? Why do some universities have higher rates of graduates' upward income mobility? I explored these two questions in forthcoming research, focusing on the role of firms and their office location decision and how these affect student access to firms on campus.1
It is important to stress that my research focuses on high-paying jobs in the finance and consulting field. I cited the following examples in my study: After opening an additional office in Detroit, Michigan, Huron Consulting Group hired an additional five undergraduate students from the University of Michigan Ross School of Business, relative to before opening this office and relative to the change in hires by other consulting firms over this period. As a second example, JP Morgan Chase dramatically increased its hires of undergraduate students from Ohio State University’s Fisher College of Business after merging with a bank that had large Columbus, Ohio, operations. By approximately five years after the merger, JP Morgan Chase was hiring an additional 15 to 20 of the university’s students, relative to before the merger and relative to the change in hires by other finance and accounting firms over this period.2
These examples suggest that because of geographic changes made by these firms, students at the University of Michigan and Ohio State were more likely to obtain high-wage jobs at two prestigious companies.
Given the prevalence of campus recruiting, increasing hires from the University of Michigan and Ohio State in these examples may reflect an increase in these firms' campus recruiting activities at these universities. In a NACE survey of 275 firms across many industries, more than 75 percent conducted on-campus interviews, and nearly 60 percent of full-time entry-level college hires were initially interviewed on campus.3
To explore this question more systematically, I collected data on office locations and recruiting decisions for more than 70 Vault-ranked prestigious finance and consulting firms at more than 360 universities from 2000 to 2013.4
My findings: Firm decisions about office locations affect universities. Firms are nearly twice as likely to recruit at a university in the years after they open a nearby office, relative to the years before the move. For the four years after firms close local offices, recruiting at local universities falls by one-third. Five or more years after moving away from the university, the likelihood of recruiting falls to about 14 percent of the pre-move likelihood.
These findings suggest the costs of recruiting further away are quite high. Universities within 10 miles of the firm's new office experience the largest effects, while the effects are much smaller or nonexistent for universities more than 10 miles away. My research also found that, in some cases, firms are willing to forego recruiting at a more selective university to recruit at a closer university. When opening an office in a smaller market, firms add new target campuses that are much less selective than their median target campus.
While the results suggest firms value proximity, it is also strikingly clear that, conditional on proximity, firms value university selectivity. While many universities benefit, Ivy Plus universities (Ivy League plus Stanford, MIT, Duke, and University of Chicago) benefit most from these new offices.
Why are recruiting decisions so sensitive to proximity? One potential explanation is that students have strong local preferences, and firms believe that recruiting farther from their office would yield many rejected offers. A second explanation, and one that my findings appear to support, is that there are significant monetary and time costs associated with recruiting further away. The fact that firms strongly increase recruiting at universities within 10 miles of their new office, but not at universities just slightly further away is unlikely because they are concerned these students would reject their offer.
It is important to note that my research focuses on recruiting for very high-wage jobs. Proximity may be even more important for jobs outside those at prestigious finance and consulting firms. Student location preferences may be even more local among students applying to non-finance and non-consulting jobs, or there may be reduced benefit of recruiting at more selective national universities. Alternatively, if recruiting for non-finance/non-consulting jobs is conducted mainly by people dedicated to recruiting, traveling slightly further may be less costly. In the sample I used, recruiting at many of the firms is often conducted by employees outside of human resources, such as management consultants, in addition to human resources professionals.
What is the general takeaway? Employers' geographic location decisions affect who has access to high-wage jobs, and potentially the value and distribution of the returns to college. An important dimension of a university’s value added is the set of firms to which the university enables access. The evidence that firms are willing to sacrifice university selectivity to recruit at closer universities suggests prospective students might consider this dimension when choosing a university, as well as the educational value added.
How might these findings be especially relevant for career services professionals? There is potentially high value from identifying companies that recently added an office in the area. These companies may be less familiar with your university, and they may already have many recruiting target campuses. However, with the right information, they may be enthusiastic to recruit on your campus, given the finding that firms highly value proximity.
Similarly, recruiting relationships should not be taken for granted. Identifying companies that have closed or decreased the size of their local offices may be important. Expanding outreach to these companies after they move may help to reduce their shift away from the institution’s students. Likely well understood by career services professionals, it is not simply student quality that matters for post-graduation outcomes. Student outcomes depend on which firms target their university for recruiting.
1 The paper, “Firm Decisions and Variation in the Returns to College: Evidence from Employer Recruiting,” not yet published, can be accessed at publish.illinois.edu/RussellWeinstein.
2 These statistics are based on annual reports from the University of Michigan Ross School of Business and the Ohio State University Fisher College of Business.
3 National Association of Colleges and Employers (2014): “Recruiting Benchmarks: On-Campus Interviews.” Retrieved June 22, 2015, from http://www.naceweb.org/s03192014/on-campus-interview-benchmarks.aspx.
4 Data on locations and recruiting were collected using The Internet Archive: Wayback Machine, an archive of the internet started in 1996 with 279 billion web pages. https://archive.org/ (Internet Archive 2017).
Russell Weinstein, Ph.D., is an assistant professor in the School of Labor and Employment Relations and in the Department of Economics at the University of Illinois at Urbana-Champaign. He earned both a doctorate in economics and a master’s degree in political economy from Boston University and a bachelor’s degree in economics from Harvard University.
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