Yes, (earlyish) Middle Proto-Finnic substituted the Proto-Baltic /s/ with /s/ but the Proto-Germanic /s/ [ʂ] with /ʃ/. Proto-Baltic of course had an /ʃ/, while Proto-Germanic hadn’t one. For bilinguals inventory structure may have mattered beside phonetics.

Fascinating! It neatly lines up with /z/ possibly being [ʐ], the ideal candidate for the later change to /r/.