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Big Fish in Small Ponds: Human Capital Migration and the Rise of Boutique Banks

Author

Listed:
  • Janet Gao

    (McDonough School of Business, Georgetown University, Washington, District of Columbia 20057)

  • Wenyu Wang

    (Kelley School of Business, Indiana University, Bloomington, Indiana 47401)

  • Xiaoyun Yu

    (Shanghai Advanced Institute of Finance, Shanghai Jiao Tong University, Shanghai 200052, China)

Abstract

We study the comparative advantage of firms with focused and multidivisional organizational forms at attracting valuable human capital. Using the merger and acquisition (M&A) advisory industry as a laboratory, we show that high-performing individuals are more likely to migrate to boutique (focused) banks, especially those who are still on the upward trajectory of their career. Such migration is amplified by the cross-subsidization inside bulge bracket (multidivisional) firms, proxied by poor performance of their non-M&A departments. The transition of skilled labor improves the performance of the boutique sector, potentially contributing to the rise of boutiques over the past two decades. Moreover, M&A deal outcomes differ when having boutique advisors. Our findings suggest that corporate organizational structure and labor migration can jointly shape industry dynamics.

Suggested Citation

  • Janet Gao & Wenyu Wang & Xiaoyun Yu, 2024. "Big Fish in Small Ponds: Human Capital Migration and the Rise of Boutique Banks," Management Science, INFORMS, vol. 70(11), pages 7829-7850, November.
    • Handle: RePEc:inm:ormnsc:v:70:y:2024:i:11:p:7829-7850
    DOI: 10.1287/mnsc.2021.03829
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