Does Employing Skilled Immigrants Enhance Competitive Performance? Evidence from Football Clubs

We investigate the effect of hiring skilled immigrant employees on the competitive performance of organizations. This relationship that 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 in Germany, France, England, and Spain 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 changes in rules that govern the number of immigrant players clubs can hire and deploy. Using these rule changes as the basis for instrumental variables, we find a positive local average treatment effect of the number of immigrant players fielded by a club 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.