Refugee Human Capital and Firm Performance

The availability of employment is a central determinant for addressing the refugee crisis in many host countries. Extant management research largely assumes that hiring refugees is part of firms’ social responsibility since the knowledge and skills of refugees are too generic to produce positive performance effects. We challenge this perspective and offer a theoretical logic for how the generic human capital of refugees results in superior performance for the hiring firm. We theorize that the performance potentials from hiring refugees emerge because of value capture mechanisms. Within our reasoning, refugees have limited opportunities to bargain for higher salaries, due to demand frictions stemming from uncertainty, stereotypes, or discrimination by other potential employers. Moreover, we theorize that firm-specific incentives make employers that offer job security and social connections more appealing to refugees and, thus, enable their employers to capture value from their generic human capital. In line with our theoretical predictions, we find, for 176,792 firms and 10,338 refugees between 2001 and 2016 in Denmark, that firms hiring refugees have higher profitability and this effect is amplified for employers offering job security and the opportunity for bonding relationships with refugee co-workers.