In a Working Paper entitled “Does Homophily Affect Performance?” Gargiulo and Assistant Professor of Strategic Management at Singapore Management University, Gokhan Ertug (INSEAD Ph.D. in Management, 2008) focused on nationality as a shared characteristic, and how it affects job performance on investment bankers. “If you are new, you’ve just been hired at an investment bank or consulting firm, it’s a difficult environment, you are likely to look for people who could be more helpful,” Gargiulo explains. “You don’t know it, but you would expect people of the same nationality as you, especially if you’re a minority, will be more naturally inclined to help. That’s why we chose nationality.” Gargiulo continues, “We chose investment bankers because we wanted a context in which informal relationships of knowledge transfers are very consequential for the performance of the individual. I mean, this is true of any organisation today, but in this knowledge-based organisation such as investment banking and consulting, it is particularly the case.”
Show me the money! The paper studied 1,746 investment bankers at a major international bank, with their performance measured by the bonuses they earned. These bankers were classified into four ranks, from most junior to most senior: Associate Director; Director (Vice-President); Executive Director (Senior Vice-President); and Managing Director. After controlling for factors that might affect how much bonus a banker earns e.g. tenure, rank, age, function, etc, Gargiulo came to one main conclusion: homophily helps a new hire, but hinders an experienced banker gunning for a promotion into senior management. (Emphasis added.)
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