Talents from abroad. Foreign managers and productivity in the United Kingdom

Abstract

In this paper, we test the contribution of foreign management to firm productivity. We use a novel data set on the careers of 115,505 managers employed in 10,238 firms in the UK from 2009–2017. We find that domestic manufacturing firms become, on average, 4.9% more productive and about 23.3% more capital intensive after hiring foreign managers. In particular, we find that prior industry-specific experience of foreign managers abroad allows spillover effects to domestic recruiting firms. On the other hand, we find no significant effect on foreign-owned firms after hiring foreign managers, possibly because technological spillovers have already occurred after takeovers by headquarters. The marginal productivity gain is twice as high when the new hires end up on all-British boards without a history of diversity. Our identification strategy combines matching techniques, difference-in-difference and pre-recruitment trends to challenge reverse causality. The results are robust to different specifications and sample composition effects. Ultimately, our results show how restrictions on the global mobility of managerial talent hamper the competitiveness of the domestic industry.