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In the Arab World there is a poor match between regional human capital and the skills demanded by employers with many firms expressing concern that they face internal employee skills deficiencies that limit performance, a phenomenon that has been popularly labeled as a “skills gap.” Many countries in the Arab World rank amongst the countries facing the most severe skills gaps in the world. While several surveys in the Arab World have identified soft skills and more basic employability skills lacking in the workforce, there is a large empirical absence, both globally and in the Arab World, of studies regarding the impact of skills gaps on firm-level performance. This analysis will attempt to apply empirically driven international research to the case of the Arab World to determine the operational impacts of skills gaps on Arab companies. With the belief that companies and governments require more rigorous empirical evidence to translate management research into practices that solve organizational problems, the paper will conclude with suggestions on proactive strategies to close labor skills gaps to increase the competitiveness of key industries which face skills gaps.