How Do Restrictions on High-Skilled Immigration Affect Offshoring? Evidence from the H-1B Program.

This article investigates how U.S. multinational companies (MNCs) respond to restrictive skilled immigration policies, specifically limitations on H-1B visas, by offshoring employment to foreign affiliates. Using detailed firm-level data on visa applications and multinational activity, the study finds that such restrictions cause firms to increase foreign affiliate employment both within existing affiliates and by opening new affiliates, particularly in China, India, and Canada. The offshoring effect is strongest for research and development (R&D) jobs but also extends to non-R&D employment, reflecting complementarities between innovation and production activities. Firm capabilities, measured by prior internationalization, significantly moderate this response: the most globalized firms substitute nearly one foreign affiliate job for every rejected visa, while the average firm substitutes less than half a job. These findings highlight skilled immigration restrictions as a push factor for the internationalization of knowledge work and suggest that domestic immigration policies can have unintended consequences on firm location choices and national innovative capacity.