Three-Party Exchanges: The Case of Executive Search Firms and CEO Search

Abstract

This paper describes a qualitative study of executive search firms (ESFs) based on their role as an intermediaries between firms and chief executive officer (CEO) candidates. Results suggest that three characteristics of the CEO labor market-small numbers of buyers and sellers, high risk to participants should a transaction become public before it is completed, and institutionalized gaps between buyers and sellers that discourages active involvement in this market-inhibits direct exchange between firms and candidates and explains the participation of ESFs. The paper then describes how ESFs facilitate the exchange between a firm's search committee and CEO candidates. In contrast to the research that often characterizes the role of third parties as opportunistic brokers arbitrating between disconnected actors, results reveal that the CEO labor market is one in which the ESF functions as a nonpartisan seeking to create the union of two parties. Evidence is also presented indicating that both firms and CEO candidates often are aware of each other's existence, but that their relationship is coordinated, mediated, and legitimated through the ESF. The theoretical and practical implications of these findings for research on market intermediaries and executive labor markets are explored.

JEL Classification: J6, L4, L1