Delegating recruitment under asymmetric information

This paper studies the incentive to delegate recruitment. The owner decides whether or not to delegate recruitment to senior employees who are better able to evaluate candidates but may avoid recruiting the best candidates as they threaten their seniority. We find that senior employees will not deliberately choose bad candidates if the only information asymmetry between the owner and the recruiter relates to candidates' 'type'. Delegation is then superior to direct (owner) recruitment although 'tenure' may still be offered to elicit the 'type' of the recruit. If additional information asymmetry is present, however, moral hazard may exist and tenure is offered to ensure that the best candidate is selected. (C) 2004 Elsevier B.V. All rights reserved.