Investing in Reputation: Strategic Choices in Career Building

Abstract

In many occupations, reputation or past performance affects the demand for a worker’s output, creating an incentive to invest in reputation early in a career. This results in a tendency for superior workers to start their career in the mainstream market. The intuition is that, for high ability workers, the returns to investing in reputation is larger in the mass market, while less able ones would avoid the more competitive mainstream by developing their specializations in the fringe market. Some mainstream workers may enter the fringe market once the motive to invest in reputation diminishes later in their careers, but less able workers who start in the fringe are seldom able to return to the mainstream. These results are empirically testable and have potential implications for product markets as well.