Who is this research for? Economists, labor market analysts, HR executives, and policymakers interested in how large firms’ hiring decisions affect local labor dynamics.
Executive Summary
This research, authored by Andrew Yizhou Liu of the Sam M. Walton College of Business, University of Arkansas (Department of Economics), investigates how industry-leading firms in the United States interact when posting
job vacancies. Liu, who presented this work at the University of Arkansas, studies
the idea of strategic complementarity in labor demand — that is, how one firm’s hiring
decisions may influence another’s.
Drawing on data that merges Compustat with the Burning Glass Technology dataset, the
analysis covers 1,200 industry leaders, representing more than 30% of employment and
vacancy postings in their sectors. Using a shift-share instrumental variable method,
Liu estimates that when competing large firms increase vacancy postings by 10%, a
focal firm tends to reduce its own postings by 5–8%.
The study identifies two main channels that may explain this pattern:
- Wage channel: Increases in competitors’ postings raise wages, which can dampen a firm’s hiring.
- Matching friction channel: When competitors post more vacancies, filling rates decline, making additional postings less attractive.
Robustness checks — including natural disaster shocks, excluding top local markets, and sample-splitting — all suggest that the effect is consistent. The findings emphasize that hiring by dominant firms may ripple through local labor markets, shaping employment opportunities and competition for skilled workers.
Action Items for Industry
- Monitor competitor postings: HR and talent acquisition teams at large firms may want to track vacancy activity of peer firms in shared labor markets.
- Plan for wage pressures: Be prepared for wage adjustments when competitors expand hiring, particularly in concentrated labor markets.
- Anticipate recruitment bottlenecks: Recognize that high overlap in talent demand across firms can slow vacancy filling rates.
- Consider educational segmentation: The study finds stronger complementarity for jobs requiring college degrees, suggesting talent shortages are more acute in high-skill markets.
- Adjust hiring strategies by shock type: Firms may face similar competitive pressures under both positive and negative shocks, pointing to the importance of flexible workforce planning.
Quote from the Researcher
“The strategic complementarity in labor demand among U.S. industry leaders highlights how interactions among large firms—through wage adjustments and matching frictions—shape local labor market dynamics and challenge the notion of perfectly competitive labor markets.”
– Andrew Yizhou Liu
Link to the Original Research
Published in Review of Economic Dynamics, available here.
📩 Interested in learning more?
If you’d like additional information about this research or to connect directly with
the researchers, please email us at research@walton.uark.edu.
