I've worked on a few teams at my job that only seemed to hire from GA Tech, MIT or Purdue (engineering), though I was the odd one out in coming from a non-engineering background (math) from a state school. Intellectual inbreeding is a big problem in some areas. New ideas tend to emerge when folks with separate (or even seemingly disparate) perspectives find ways to address a common problem. This can describe multidisciplinary teams, but also teams with folks who learned the same subject in different ways.

That said, I do agree that I've always been impressed with prospective hires & the students we've mentored from top-tier schools. But I also know that a great student could come from anywhere, and if they also happen to be local it can be a real value multiplier.