Does Employing Skilled Immigrants Enhance Competitive Performance? Evidence from European Football Clubs
We investigate the effect of hiring skilled immigrant employees on the performance of organizations. This relationship has been difficult to establish in prior work due to theoretical ambiguity, limited data, and inherent endogeneity. We overcome these difficulties by studying European football (soccer) clubs during 1990-2020. Detailed microdata from this setting offers unusual transparency on the migration and hiring of talent and their contribution to collective performance. Further, the industry is characterized by country-level rule changes that govern the number of immigrant players clubs can hire. Using these rule changes as the basis for instrumental variables, we find a positive local average treatment effect of the number of immigrant players on the club’s in-game performance. To examine the theoretical mechanisms, we explore whether immigrants cause superior performance because they are more talented than natives or because they enhance the national diversity of their clubs. We find strong evidence for the talent mechanism. We find contingent evidence for the national diversity mechanism: national diversity has a positive relationship with club performance only when the club employs an immigrant manager (coach). The presence of an immigrant manager also strengthens the positive relationship between the number of immigrant players and club performance.
Authors contributed equally. We thank Martin Ganco, Megan Lawrence, Lindy Greer, and participants in the Strategy Research Forum and the Smith Entrepreneurship Research Conference for constructive comments. We thank James Reade and Maurizio Valenti for generously offering their expertise and connections to help us learn about foreign player transfer rules in several European football leagues. We also thank Jan Fischer for his assistance in learning about rules changes relating to foreign player restrictions in the Bundesliga. Francisco Morales wants to acknowledge that funding for this work was provided by FONDECYT (Chile) through grant 11200342. All errors are our own. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.