Unintended Signals: Why Companies with a History of Offshoring Have to Pay Wage Penalties for New Hires

Alina Grecu*, Wolfgang Sofka, Marcus Møller Larsen, Torben Pedersen

*Corresponding author af dette arbejde

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We explore how companies with a history of offshoring attract their future employees. We reason that offshoring decisions send unintended signals about job insecurity to companies’ onshore labor markets. This signaling effect implies that offshoring companies must pay higher salaries for new hires than non-offshoring companies. We tested our predictions on a sample of 7971 matched managers and professionals recently hired by offshoring and non-offshoring companies. Our results indicate a 3–7% wage penalty for offshoring companies. Thus, we conclude that not only is offshoring challenging to implement, but it can also entail a number of general ramifications for the domestic labor market.
TidsskriftJournal of International Business Studies
Udgave nummer3
Sider (fra-til)534-549
Antal sider16
StatusUdgivet - apr. 2022

Bibliografisk note

Published online: 16 January 2022.


  • Offshoring
  • Hiring
  • Wage penalty
  • Hidden costs
  • Signaling theory