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Do MNEs Train More than Domestic Firms?

Written by: OECD Development Centre

Article Overview: Most empirical findings confirm this by using variables representing foreign ownership. Tan and Batra (1996), Tan and Lopez-Acevedo (2003), and Miyamoto and Todo (2003) show that higher foreign equity share is indeed an important determinant of training in Mexico, Indonesia and Malaysia. Why do MNEs train more than domestic firms?

Do MNEs Train More than Domestic Firms?

Most empirical findings confirm this by using variables representing foreign
ownership. Tan and Batra (1996), Tan and Lopez-Acevedo (2003), and Miyamoto and
Todo (2003) show that higher foreign equity share is indeed an important determinant of
training in Mexico, Indonesia and Malaysia. Why do MNEs train more than domestic
firms? The literature provides numerous explanations. MNEs are less likely to face credit
constraints since they usually have wide access to foreign capital. It is also suggested
that MNEs are more likely to gain information on techniques and organisation of training
since their range of information is global. They can also reduce the probability of labour
turnovers by providing attractive compensation packages to keep the employees after
the training provision27. A recent analysis in Almeida (2003) indicates that foreign-owned
firms “cherry pick” domestic firms to be acquired, choosing those firms with a higher
educated workforce. If an educated workforce is more likely to be trained, or if “cherry
picked” firms tend to be high-technology firms that require training, MNEs are more likely
to train than domestic firms.

OECD DEVELOPMENT CENTRE
Working Paper No. 211
HUMAN CAPITAL FORMATION
AND FOREIGN DIRECT INVESTMENT
IN DEVELOPING COUNTRIES
by
Koji Miyamoto

Related Articles
  Questions Posed: HUMAN CAPITAL FORMATION AND FOREIGN DIRECT INVESTMENT IN DEVELOPING COUNTRIES
  HUMAN CAPITAL FORMATION BY MNES AND TECHNOLOGY TRANSFERS
  Technology Transfer through Training Spillovers
  Summary: HUMAN CAPITAL FORMATION AND FOREIGN DIRECT INVESTMENT IN DEVELOPING COUNTRIES
  CONCLUSION: HUMAN CAPITAL FORMATION AND FOREIGN DIRECT INVESTMENT IN DEVELOPING COUNTRIES

Article Tags: acevedo, almeida, attractive compensation packages, batra, credit constraints, determinant, developing countries, empirical findings, equity share, explanations, foreign direct investment, high technology, human capital formation, koji miyamoto, labour, oecd development centre, probability, technology firms, turnovers, workforce



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