The scientific (though old) answer is that 1) referred candidates stay longer 2) referred candidates are better informed and so more likely to succeed at the in

The scientific (though old) answer is that 1) referred candidates stay longer 2) referred candidates are better informed and so more likely to succeed at the interviews, which means less time waste for the employer 3) referring employees stay longer for they feel 'responsible' for the referred candidate for some time (source: http://en.wikipedia.org/wiki/Mark_Granovetter http://en.wikipedia.org/wiki/Mark_Granovetter) Adding the cost aspect, it's clear why companies like referral programs