Human Capital Formation by MNEs and Domestic Firms: Determinants of Enterprise Training
Human Capital Formation by MNEs and Domestic Firms: Determinants of Enterprise Training
developing and developed countries (Batra and Tan, 2002; OECD, 2003; OECD,
forthcoming). Among the few surveys that cover enterprise training in the developing
countries, the World Business Environment Survey (WBES) provides some information
about cross-country comparison in training incidence. It shows that on average, 60 per
cent of firms in both East Asia and Latin America and the Caribbean (LAC) regions
conduct some formal training (Batra and Tan, 2002; Batra, 2003). However, there are
wide variations in the incidence of formal training, which ranges from 65 to 75 per cent in
China, the Philippines, and Singapore to 30 per cent in Malaysia. Another set of
enterprise surveys that compared training incidences in Indonesia, Malaysia, Chinese
Taipei, Columbia, and Mexico in the early 1990s25 also confirm large variances, with high
performing countries such as Columbia (50 per cent) and Malaysia (35 per cent) to low
performing countries such as Indonesia (19 per cent), Chinese Taipei (9 per cent) and
Mexico (11 per cent).
What are the sources of training? WBES distinguishes between formal in-house
training provided by the employer, and formal training provided by external public/private
training institutions. It indicates that formal in-house training is the major source of
training provided by firms in both East Asia and LAC regions, accounting for 40 per cent
in East Asia and 50 per cent in the LAC. Among firms that use outside training sources,
most firms in both regions appear to rely on private training institutions.
Underinvestment in training that is relatively unequally distributed is a disturbing
evidence when host developing countries are trying to catch up with the skills level of the
industrialised economies and enterprise training is one of the most important sources of
skills acquisition. Indeed many studies have shown that enterprise training raises labour
productivity substantially. Empirical studies show that productivity gains of training range
from about 50 to 75 per cent in Indonesia, Nicaragua and Guatemala, to about 30-45 per
cent in Mexico, Malaysia and Colombia (Tan and Batra, 1996; Batra, 2003). These
productivity gains are even stronger for small- and medium-sized firms (World Bank,
1997). Before describing policy measures to tackle these training problems, the literature
on training determinants is assessed to identify the reason behind this underinvestment.
OECD DEVELOPMENT CENTRE
Working Paper No. 211
HUMAN CAPITAL FORMATION
AND FOREIGN DIRECT INVESTMENT
IN DEVELOPING COUNTRIES
by
Koji Miyamoto
Human Capital Formation by MNEs and Domestic Firms Determinants of Enterprise Training - To learn more about this author, visit OECD Development Centre's Website.
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It is a general understanding that firms in general underinvest in training in both
developing and developed countries (Batra and Tan, 2002; OECD, 2003; OECD,
forthcoming). Among the few surveys that cover enterprise training in the developing
countries, the World Business Environment Survey (WBES) provides some information
about cross-country comparison in training incidence. It shows that on average, 60 per
cent of firms in both East Asia and Latin America and the Caribbean (LAC) regions
conduct some formal training (Batra and Tan, 2002; Batra, 2003). However, there are
wide variations in the incidence of formal training, which ranges from 65 to 75 per cent in
China, the Philippines, and Singapore to 30 per cent in Malaysia. Another set of
enterprise surveys that compared training incidences in Indonesia, Malaysia, Chinese
Taipei, Columbia, and Mexico in the early 1990s25 also confirm large variances, with high
performing countries such as Columbia (50 per cent) and Malaysia (35 per cent) to low
performing countries such as Indonesia (19 per cent), Chinese Taipei (9 per cent) and
Mexico (11 per cent).
What are the sources of training? WBES distinguishes between formal in-house
training provided by the employer, and formal training provided by external public/private
training institutions. It indicates that formal in-house training is the major source of
training provided by firms in both East Asia and LAC regions, accounting for 40 per cent
in East Asia and 50 per cent in the LAC. Among firms that use outside training sources,
most firms in both regions appear to rely on private training institutions.
Underinvestment in training that is relatively unequally distributed is a disturbing
evidence when host developing countries are trying to catch up with the skills level of the
industrialised economies and enterprise training is one of the most important sources of
skills acquisition. Indeed many studies have shown that enterprise training raises labour
productivity substantially. Empirical studies show that productivity gains of training range
from about 50 to 75 per cent in Indonesia, Nicaragua and Guatemala, to about 30-45 per
cent in Mexico, Malaysia and Colombia (Tan and Batra, 1996; Batra, 2003). These
productivity gains are even stronger for small- and medium-sized firms (World Bank,
1997). Before describing policy measures to tackle these training problems, the literature
on training determinants is assessed to identify the reason behind this underinvestment.
OECD DEVELOPMENT CENTRE
Working Paper No. 211
HUMAN CAPITAL FORMATION
AND FOREIGN DIRECT INVESTMENT
IN DEVELOPING COUNTRIES
by
Koji Miyamoto
Human Capital Formation by MNEs and Domestic Firms Determinants of Enterprise Training - To learn more about this author, visit OECD Development Centre's Website.
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