literature on human capital formation and FDI provides tentative answers to the five questions posed in the introduction of this paper. First, to attract any type of FDI, host developing countries need an adult population with at least basic schooling. The type of human capital necessary to attract FDI obviously depends on the type of FDI host countries seek. To attract high value-added MNEs, it is necessary to develop the tertiary education sector with close collaboration with the industry so as to formulate demanddriven programmes. Second, MNEs can contribute to the HRD of the host developing country by providing training and supporting formal education. Small and medium domestic firms tend to underinvest in training as compared to MNEs and large domestic firms, even though the former group usually enjoys higher productivity gains from training. The underinvestment appears to be due to market failures including lack of information, financial constraints and training spillovers. Third, MNEs contribute to technology transfers through numerous channels of training spillovers, including vertical/horizontal linkages, labour turnovers, and spin-offs. Host country efforts to improve the absorptive capacity have also been shown to facilitate technology transfers.
Fourth, government policies have been important to facilitate training, to minimise financial constraints and market failures, and to promote MNEs to invest in HRD of the host economy. Most of the successful training policies have been demand-driven, involving industries, MNEs, IPAs, and foreign academic institutions that have close ties with the advanced developments in technology, business administration and management. Lastly, there is limited evidence of a virtuous circle of inward FDI, HRD and technology transfers. Governments that emphasise flexible demand-driven HRD strategies, target MNEs in high value-added areas, and co-ordinate education and training policies are more likely to lead the country into a virtuous circle.
The arguments made in this paper are based on limited evidence extracted from the literature on human capital and FDI, and a number of selected case studies of firms operating in developing countries. Obviously, more evidence and detailed analyses are required to gain clear and in-depth understanding of the changing role of HRD, FDI and economic growth. In particular, there are few areas that may help extend the understanding on this issue. One is to initiate globally comparable firm-level surveys that contain detailed information on HRD activities among firms. While the World Business Environment Survey provides some cross-country information on training in East Asia and Latin America, it is limited with respect to its small sample size (per-country), limited coverage (East Asia and LAC-region), and lack of information on inter-firm linkage.
Another area that may facilitate this line of research is the analyses of matched employers-employees surveys that contain detailed information on employee training and inter-firm linkages. While such surveys have become increasingly available in developed countries, only a limited number exist in developing countries. The last area of research could be on the collaboration between different actors of FDI and HRD including MNEs, IPAs, governments and educational institutions, which would provide a better understanding of how synchronisation among different stakeholders can be best made so as to attain flexible and demand-driven HRD policies.
OECD DEVELOPMENT CENTRE Working Paper No. 211 HUMAN CAPITAL FORMATION AND FOREIGN DIRECT INVESTMENT IN DEVELOPING COUNTRIES by Koji Miyamoto
To learn more about this author, visit OECD Development Centre's Website.
Like this article? Share it with your friends
|
|
OECD Development Centre
(Visit OECD's Website)
Created in 1962 by the Organisation for
Economic Co-operation and Development
(OECD) in Paris, the Development Centre is
an interface between OECD Member countries
and the emerging and developing
economies.
The Development Centre occupies a unique
place within the OECD and in the
international community. It is a forum
where countries come to share their
experience of economic and social
development policies. The Centre
contributes expert analysis to the
development policy debate. The objective
is to help decision makers find policy
solutions to stimulate growth and improve
living conditions in developing and
emerging economies.
|
|
|
OECD Development Centre's
Complete
List Of
African-Accounts
Articles
|
|
If you enjoyed this article, get OECD Development Centre's Complete List of African-Accounts Articles For FREE!
|
|
|
|
![[Get Copyright Permissions]](http://license.icopyright.net/images/icopy-w.gif){kind=small}
