The Effects of Foreign Competition on Network Hiring

The process through which firms find workers is an important determinant of productivity in the developing economies. This paper investigates a previously unexplored macroeconomic effect of foreign competition on network... [ view full abstract ]

The process through which firms find workers is an important determinant of productivity in the developing economies. This paper investigates a previously unexplored macroeconomic effect of foreign competition on network hiring. Using a rich panel dataset of Vietnamese SMEs, this paper shows that as foreign competition increases a firm is more likely to hire through personal contacts or referrals. Firms increasingly hiring through their network can explain a significant part of the productivity gains associated with foreign competition. This result has shown to be robust across various specifications. A matching model is presented to explain this behaviour.