Talents from Abroad. Foreign Managers and Productivity in the United Kingdom

TL;DR

This study analyzes how hiring foreign managers impacts UK firms' productivity, finding significant gains especially from EU managers, with implications for talent mobility post-Brexit.

Contribution

It provides novel empirical evidence on the productivity effects of foreign managers in UK firms using a large, detailed dataset and robust identification strategies.

Findings

Domestic firms increase productivity by 7-12% after hiring foreign managers.

Industry-specific experience accounts for 15.6% of productivity gains.

EU managers constitute about half of foreign recruits and are highly valuable.

Abstract

In this paper, we test the contribution of foreign management on firms' competitiveness. We use a novel dataset on the careers of 165,084 managers employed by 13,106 companies in the United Kingdom in the period 2009-2017. We find that domestic manufacturing firms become, on average, between 7% and 12% more productive after hiring the first foreign managers, whereas foreign-owned firms register no significant improvement. In particular, we test that previous industry-specific experience is the primary driver of productivity gains in domestic firms (15.6%), in a way that allows the latter to catch up with foreign-owned firms. Managers from the European Union are highly valuable, as they represent about half of the recruits in our data. Our identification strategy combines matching techniques, difference-in-difference, and pre-recruitment trends to challenge reverse causality. Results are robust to placebo tests and to different estimators of Total Factor Productivity. Eventually, we argue that upcoming limits to the mobility of foreign talents after the Brexit event can hamper the allocation of productive managerial resources.