In Search for New Knowledge: When Does Hiring Foreign R&D Workers Foster Exploration?

This paper examines how firms’ recruitment of high-skilled foreign R&D workers affects firm-level exploration. We argue that by hiring foreign R&D workers, firms are more likely to gain access to novel and complementary knowledge, which will foster exploration. Examining a sample of 376 Danish R&D active firms over the period from 2001 to 2013, we show the effect is most pronounced when foreign R&D hires originate from geographical backgrounds that are represented to a lesser extent within firms’ incumbent R&D workforce. Moreover, we show that this effect holds, even when the cognitive distance between these new hires and firms’ incumbent R&D workforce is low. Finally, we highlight the temporary nature of this “exploration premium” as these results only hold for newly hired foreign workers.