Hiring Immigrants is a Golazo for Your Company
Using data from European football (soccer) clubs, we find that immigrants causally enhance competitive performance by allowing organizations to deploy a wider variety of strategic moves.
Are firms better off when they hire immigrants? This is a big, juicy question! It gets at the heart of whether immigrants are good for the economy and whether organizations should care about recruiting a globally diverse workforce. If foreign workers help domestic firms perform better, economies will be more competitive the more international variety in firms’ workforces. But if those workers have a neutral or negative effect, efforts to attract foreign talent may be unnecessary or detrimental.
As important as the question is, it’s really tough to convincingly test whether hiring more immigrants leads to better performance. In a perfect world, we would be allowed to run a simple experiment: Randomly assign some firms to hire immigrants and other firms not to, compare their performance afterwards, and then explain any observed performance differentials. For some odd reason, companies aren’t eager to let us do that!
OK, no experiment possible. Is there any other way to convincingly test this?
I’m glad you asked, because my coauthors and I think we’ve done it. And in the coolest industry of all: football (a.k.a. soccer or futbol). Our paper is titled “Does Employing Skilled Immigrants Enhance Competitive Performance? Evidence from European Football Clubs.” When I see we/our, I refer to one of my favorite coauthor teams of all time: Britta Glennon, Francisco Morales, and Seth Carnahan. [Besides awesome collaborators, this project is a dream for another reason. I get to merge my favorite hobby (futbol) with my job (research). And I don’t have to deal with annoying parents on the sidelines!]
We studied football clubs from the five most prestigious European leagues: Germany, Italy, France, England, and Spain. The setting allows for a unique level of transparency on the migration and hiring of a truly global pool of talent and its impact on organizational (team) performance. We have data between 1990 and 2020 on every key moment in players’ careers and on literally every move those players make on the field. Another key advantage is that country-level rules govern how immigrant players are defined and the number of immigrant players that clubs can utilize. For example, Spain and Germany have differed over the years in how many foreign players clubs can field and in which countries are exempt from the cap on foreign-born players. Changes to these rules happen for complex, often political reasons that are uncorrelated with clubs’ performance on the field. We use those rule changes as “instrumental variables” to predict the number of immigrant players in a club's starting lineup [data nerds can go to the methodology section at this point]. Crucially, we limit our study to games in which teams from different countries play one another. Because the two teams are subject to different caps on foreign players, one of them is able to field extra foreign players for reasons outside the control of either team. While this doesn’t equal the ideal experiment to which I referred earlier, it gets quite close in helping us isolate the causal impact of immigrant players on club performance.
Our results are quite clear: the more immigrant players a team is able to field, the bigger the goal differential at the end of the match and the higher the likelihood of winning. Hiring foreign-born talent helps make clubs more competitive.
But why does hiring immigrants enhance organizational performance? We document two mechanisms.
The first mechanism is that immigrants are more individually skilled , on average, than native-born players. We document that immigrant players:
Are more likely to be in the starting lineup
Have a higher rate of successful dribbles
Have a higher rate of successful passes
Score more frequently (as the figure below shows)
At the same time, imigrants players do not exhibit any differences in metrics unrelated to individual talent, such as getting a yellow or red card or the frequency with which they touch the ball. We emphasize in the paper that the skill differential is not because, say, all Brazilians are inherently more talented than all Germans. It’s most likely the result of the labor market frictions that make it hard for foreign-born players to make it to a top European league. A German has higher odds to be scouted by a German team than a Brazilian—so the Brazilian who makes it to the German league (Bundesliga) has to be exceptional.
The second mechanism is even more interesting (at least to me): immigrant players help increase strategic variety, defined as the range of tactics and strategies that a football club can deploy to beat its opponents. Immigrants enhance strategy variety by bringing diverse skills and perspectives to the team. For example, foreign-born players can introduce new styles of play that are common in their home countries but not as prevalent in the domestic league. Or those players can provide additional options and flexibility in terms of team formation and tactics. If a club has a number of immigrant players with diverse skills and positions, it can mix and match these players to create different lineups and tactics depending on the opposition.
We show that this is the case by using data on the passing networks each club uses during games. We find that the more immigrant players a team is able to field (recall: for reasons outside of its control), the greater the variety, density, and complexity of its passing network. Those features of the passing network, in turn, help teams outscore and beat their opponents.
To understand the role immigrants played in enhancing strategic variety, we dug even deeper into passing network data. Interestingly, we found that immigrant players were more likely than native players to be involved in orchestrating complex passing sequences. Immigrants were more frequently playing the “coordinator” or “mediator” role in passing triangles by being in the B position of an ABC passing sequence (but not any more or less likely to be in the A or C positions). This tells us that the unique skills, perspectives, or adaptability of foreign-born players leads them to be critical in the execution of strategic variety.
Any football (soccer) fan can think of many examples of what we show in this paper. Liverpool’s recent successes have been fueled by immigrant players such as Mohamed Salah (Egypt), Sadio Mane (Senegal), and Alisson Becker (Brazil). Another example is Leicester City's unexpected victory in the 2015-2016 Premier League. A previously mediocre club was driven to success in part by the contributions of unheralded but outstanding immigrant players such as N'Golo Kante (France) and Riyad Mahrez (Algeria). And I have to bring up my favorite and undisputed GOAT, Lionel Messi, who emigrated to Spain from Argentina at a young age. If nothing else, now you know that these foreign born players have a positive causal impact on your favorite team’s performance.
But are the results applicable only to football or sports? We don’t think so. We used football as a convenient empirical context because it allows us to conduct a rigorous, causal test. And, naturally, our findings need to be verified elsewhere. But we believe there are many sectors in which talent is the primary source of competitive advantage and in which labor markets are truly global. One example is the tech industry. Skilled immigrants, such as software developers or data scientists, bring diverse skills and perspectives to tech companies, allowing them to implement a wider range of strategies to take advantage of new technologies more rapidly and access global markets more efficiently. Another example is the healthcare industry, where immigrant doctors and nurses could bring a range of specialized skills and experiences to a hospital or clinic. These workers could help the organization deploy a wider range of treatment options and strategies, leading to better patient outcomes and a more competitive position in the market. It’s not a coincidence that business leaders from these two sectors routinely beg regulators for more liberal immigration policies (e.g. increasing the number of H1-B visas).
We also hope our study informs policymakers who are considering whether to increase or decrease the number of skilled immigrants allowed into their countries, states/provinces, or cities. Policymakers could use the findings of the paper to advocate that skilled immigrants can bring significant benefits to the businesses in their jurisdictions and to the economy as a whole. A few months ago, I had a conversation with a prominent businessperson from one of the states in the U.S. He represented a coalition of government, industry, and civic leaders eager to bring more talent to their state. They were trying to articulate why they should advocate for more foreign talent. This study provides one powerful motivation: skilled immigrants not only bring raw talent; they also increase the strategic variety of thing organizations can do well, which enhances the competitiveness of firms in the economy.