This study utilizes unique Finnish firm-level microdata on service imports, productivity, and employment during the 2002–2016 period. We use world service export demand shocks as an instrument to identify the causal effect of service offshoring on firm-level performance. Our results indicate that while service offshoring does not impact productivity, it increases the number of employees and also immigrant employment. Despite the rise in overall employment, service offshoring affects the occupational structure within firms. Specifically, firms that increase service sourcing from abroad exhibit reduced shares of managerial and technical jobs, accompanied by a simultaneous increase in the share of production work.
