Peer Effects: How Coworkers' Prior Turnover Experiences Affect Employee Turnover

Abstract

Despite a long-standing interest in employee turnover, we still lack a complete understanding of what drives employees to quit firms. Most of the previous studies on employee turnover imply that employees are economic actors that base their turnover decisions independently on intra- and extra-firm factors. However, given the human nature to socialize with others and the amount of daily interactions among employees within firms, employees turnover behaviors are inevitably influenced by their coworkers to some extent. This study addresses how a different composition of peer groups in terms of their prior turnover experiences has a varying effect on employees turnover behaviors. I posit that coworkers with prior turnover experiences spill information about other firms and reduce the stigma of switching firms, stimulating employees turnover behaviors. Furthermore, the process is specified by distinguishing star employees and non-star employees. In the setting of Korean security analysts from 2008 to 2013, my multilevel generalized linear modeling results indicated that employees are more likely to leave workplaces where a great share of coworkers have prior turnover experiences. In addition, while star employees are affected only by star coworkers, non-star employees are affected by both star and non-star coworkers. The present findings offer novel yet critical insights to theories and practices in the antecedents of employee turnover.