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What I recommend is that your friend applies to the job through the right channel and follows the HR procedures for the position. However, you can support him by adding you as a reference in his application. Then you recommend him to your boss and support him if he was short-listed.
If you want to lose your friend, then yes please work together. It's like spouses working together. My advise is not to let your friend work in the same department.
It is not recommended if you will work together but if it something your friend need it badly, then you can do it.
Well, I would take it in a positive way. Because I have done research in "How internal conflict affect employee behavior" and I know conflict between groups and peer could be effective sometimes and the organization does want such conflict because it promotes productivity. If you recommend your friend you will be always in competition with her/him and it will result in your performance boost also you will be a focus on personal development too. So, I would say it's a healthy approach. Go Ahead. Just recommend your friend. We Muslims believes that Allah has promised to give you Rizq (wealth, money) so one should not worry about losing a job.
Most of my replies begin with "that depends", but this particular case really totally depends on you and your friend ;)