Unintended signals: Why companies with a history of offshoring have to pay wage penalties for new hires



Grecu, Alina, Sofka, Wolfgang ORCID: 0000-0003-1598-6127, Larsen, Marcus M and Pedersen, Torben
(2022) Unintended signals: Why companies with a history of offshoring have to pay wage penalties for new hires. JOURNAL OF INTERNATIONAL BUSINESS STUDIES, 53 (3). pp. 534-549.

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Abstract

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.

Item Type: Article
Uncontrolled Keywords: offshoring, hiring, wage penalty, hidden costs, signaling theory
Divisions: Faculty of Humanities and Social Sciences > School of Management
Depositing User: Symplectic Admin
Date Deposited: 28 Jan 2022 08:11
Last Modified: 18 Jan 2023 21:14
DOI: 10.1057/s41267-021-00486-3
Related URLs:
URI: https://livrepository.liverpool.ac.uk/id/eprint/3147730