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In many European countries labor markets became more and more demand oriented. However, the average use of recruiting abroad is still low. From a firm perspective, recruiting abroad comes at substantial costs and risks. The purpose of this paper is to identify mechanisms leading to the use of recruiting from abroad.

Effects are retrieved from simple OLS regressions as well as from demand-sided instrumental variable specifications applied to a large German establishment-level dataset.

The share of foreign workers in the contemporary work force enhances recruiting abroad, which is in line with theoretical considerations that foreigners indicate of successful international assignments. The results also indicate that internationally operating businesses more likely recruit from abroad. Furthermore, the author finds that market forces are relevant for the strategy to recruit abroad. Both, the regional scarcity of labor and a high demand for skilled labor affect the employer’s decision to recruit abroad.

The results indicate that internationally oriented businesses more likely recruit abroad. Furthermore, labor market mechanisms, such as scarcities, are functional and foster the use of foreign labor markets.

This study adds to the literature by providing first empirical evidence on recruiting abroad, which is the use of foreign labor markets.