2018/02/01 by Alan Benson, Dongchen Li, Kelly Shue · 1 citation
Social Sciences · #Historical Legal Studies and Society
paper · pdf · doi:10.3386/w24343
openalex publication_date 2018/02/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/08/04
The best worker is not always the best candidate for manager. In these cases, do firms promote the best potential manager or the best worker in her current job? Using microdata on the performance of sales workers at 214 firms, we find evidence consistent with the "Peter Principle," which predicts that firms prioritize current job performance in promotion decisions at the expense of other observable characteristics that better predict managerial performance. We estimate that the costs of promoting workers with lower managerial potential are high, suggesting either that firms are making inefficient promotion decisions or that the benefits of promotionbased incentives are great enough to justify the costs of managerial mismatch.