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Human Capital Formation by MNEs: Supporting Formal Education

Written by: OECD Development Centre

Article Overview: While training is no doubt the major source of HRD activities undertaken by the MNEs, they can also contribute to the HRD of host developing countries by mobilising formal education. One of the MNEs that has invested substantially in formal education is Intel. They have invested in curriculum, educational equipment, infrastructure and technical support to almost all countries where they have production facilities, including Argentina, Brazil, Costa Rica, China, Malaysia, South Korea, India, Russia, Poland, Ireland and South Africa.

Human Capital Formation by MNEs: Supporting Formal Education

While training is no doubt the major source of HRD activities undertaken by the
MNEs, they can also contribute to the HRD of host developing countries by mobilising
formal education. One of the MNEs that has invested substantially in formal education is
Intel. They have invested in curriculum, educational equipment, infrastructure and
technical support to almost all countries where they have production facilities, including
Argentina, Brazil, Costa Rica, China, Malaysia, South Korea, India, Russia, Poland,
Ireland and South Africa.
For example, in China, Intel has supported tertiary education through effective
curriculum development and research. Working closely with the Chinese academia, Intel
has participated in joint research projects, facilitated technology development, and
provided scholarships. In Costa Rica, Intel has assisted all levels of formal education in
their Robotics Programme by providing training workshops for teachers, curriculum
development, and providing equipment and materials. Their collaboration with the tertiary
education sector includes technical assistance to the engineering curriculum and
equipment supply to the University of Costa Rica and the Costa Rica Technology.
Another example of MNE participation in education is Toyota Motors Corporation
in Indonesia. Toyota decided to collaborate with ASTRA foundation and created the
Toyota-ASTRA foundation with the aim of supporting HRD through education, training
and R&D. Recent programmes include scholarships to students at all levels of formal
education, but in particular for children from poor families; educational materials and
equipment to schools and universities; and research grants to universities and research
institutions.
What are the motivations for MNEs to support formal education? Is it out of charity
or to gain good publicity, which may well make sense under the recently growing hostility
towards the MNEs? Does recently growing awareness of corporate social responsibility
help in supporting MNE investment in human capital? Moreover, are there economic
benefits for MNEs to invest in education? One economic benefit that MNEs may gain is
the possibility to hire graduates from the educational institutions that MNEs are
supporting. In other words, if it is more cost efficient to invest in formal schooling rather
than providing in-house enterprise training, MNEs’ investment in formal education can be
justified. However, it is not clear if the graduates will end up working for the MNEs that
had financed part of the education. To the extent that the type of skills funded by MNEs
are most likely related to the skills relevant for the MNEs themselves or for their suppliers
and distributors, most of the students are likely to be employed in firms with at least
some backwards or forwards linkages to the MNEs. To verify these hypotheses, tracer
studies of graduates of MNE-funded educational institutions are necessary.
One interesting example of services sector MNEs that have direct links to
educational institutions are Universities and Business schools in the US and Europe. In
fact, this is a special case of MNEs supporting HRD of host developing countries by
themselves being the provider of education services. Examples of these include Harvard
Business School in the US, INSEAD in France and the Stockholm School of Economics,
all of which have school branches around the world including the developing countries.
Singapore is one of the popular places where foreign educational institutions are located.

Recent efforts by governments to further attract and expand educational services MNEs
is the World Class Universities Programme, which aims to attract at least 10 world class
education institutions. Today eight top American and European schools with strong
linkages to industry conduct advanced postgraduate education and R&D programmes in
business, management, engineering and applied sciences. Although some of the
participants of these educational programmes may be non-Singaporean who may not
stay in the country after graduation, these educational services MNEs are expected to
contribute to HRD by fostering R&D and supplying high-skilled graduates to the fastgrowing
industry.

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

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  Questions Posed: HUMAN CAPITAL FORMATION AND FOREIGN DIRECT INVESTMENT IN DEVELOPING COUNTRIES
  Summary: HUMAN CAPITAL FORMATION AND FOREIGN DIRECT INVESTMENT IN DEVELOPING COUNTRIES
  Preface: HUMAN CAPITAL FORMATION AND FOREIGN DIRECT INVESTMENT IN DEVELOPING COUNTRIES
  CONCLUSION: HUMAN CAPITAL FORMATION AND FOREIGN DIRECT INVESTMENT IN DEVELOPING COUNTRIES
  Attracting Service Sector MNEs

Article Tags: argentina brazil, chinese academia, corporate social responsibility, curriculum development, education training, educational equipment, educational materials, formal education, hostility, mnes, motivations, no doubt, poor families, research grants, research institutions, schools and universities, south korea, technology development, tertiary education sector, toyota motors



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