Big Fish in Small (and Big) Ponds - A Study of Careers

Abstract

Talented, ambitious workers (big fish) often join highly competitive organizations (big ponds), though they sometimes instead choose less competitive organizations (small ponds) offering brighter promotion prospects. Big fish exist in both types of organizations, though average worker ability is higher in big ponds. Top executives enjoy higher wages in big ponds. Choosing a big pond allows workers to signal high ability. Workers sometimes overestimate or underestimate their abilities, choosing the wrong pond. They also vary in their desire to be promoted. All of the preceding phenomena are shown to be consistent with equilibrium in a new theoretical model of careers.