The organization of online outsourcing: Observational and field experimental studies

This thesis explores how digitized international labor markets affect hiring and the organization of production using experimental and observational data from the world's largest online contract labor market, oDesk. Team-based production in knowledge work is becoming increasingly important for firm success, and with the globalization of economic activities, teams of workers are increasingly diverse in their nationality and skill sets. In the first chapter of this thesis I test whether these differences have meaningful implications for performance by designing and conducting a natural field experiment to examine how national diversity affects the returns to team work. I find that team work improves outcomes when workers are from the same country, and worsens outcomes when workers are from different countries relative to groups independent workers. I also find that these results are most pronounced for groups of workers with specialized skills sets. These findings suggest that while technology is facilitating cross-border interactions with potentially large benefits such as knowledge transfer, market growth, and access to higher paying jobs, participants in international markets may benefit from investing in managing the costs associated with national diversity. Aside from the costs national diversity introduces into team work, international labor markets may also introduce informational costs for employers trying to hire from countries they know little about. Using observational data from the same market, oDesk, the second chapter of my dissertation considers how employers from developed countries and contract workers from developing countries overcome the information asymmetries associated with remote work. This chapter finds that workers from less developed countries are disadvantaged relative to those from developed countries in terms of their likelihood of being hired by employers from developed countries, but that verifiable information benefits them relatively more. This suggests that reliable and easily understood information can overcome some of the difficulties associated with hiring foreign workers. The final chapter of my thesis considers some of the broader implications of the digitization of contract labor for workers and firms by taking advantage of observational and survey data from oDesk.