Is the Hiring of Refugees more than Charity? Implications for Firms Performance

Prior research on migration has mainly considered economic migrants. We shift attention to forced migrants (i.e., refugees) and study how their hiring can contribute to firm performance. We integrate the specificity of refugees’ human capital and their labor market conditions into strategic human capital theory. We theorize that firms hiring refugees experience higher performance because of the frictions characterizing the labor market for refugees. Refugees have limited bargain power over salaries and, once hired, will exert more effort and commit to the organization to a greater extent than the average employee. We also theorize that some firms have idiosyncratic capabilities to leverage these frictions, namely firms that can offer job security or have an information advantage regarding refugee human capital. We find support for our theoretical predictions with a matched sample of 176,796 firms in Denmark over the period 2001-2016.