Human resource development (HRD) and foreign direct investment (FDI) are among the key drivers of growth in developed and developing countries1. While HRD and FDI individually affect growth, they also reinforce each other through complementary effects. In general, enhanced HRD increases incoming FDI by making the investment climate attractive for foreign investors. This is done through a direct effect of upgraded skill level of the workforce, as well as via indirect effects such as improved socio-political stability and health (World Bank, 2003; UNESCO and OECD, 2003). On the other hand, FDI contributes to HRD since multinational enterprises (MNEs)2 themselves can be active providers of education and training, bringing new skills, information and technology to host developing countries. Ultimately, this complementary effect leads to a virtuous circle of HRD and FDI where host countries experience continuous inflow of FDI over time by increasingly attracting higher value-added MNEs, while at the same time upgrading the skill contents of preexisting MNEs and domestic enterprises.
Figure I.1 illustrates how this virtuous circle takes place. The first part of the cycle (A: Determinants of Inward-FDI) shows that sound government policies are important determinants of FDI3. Host investment climate such as market access and availability/quality of factors of production are other key factors affecting inward-FDI.
Sound policies should also contribute to a better investment climate. After a host developing country succeeds in attracting FDI, the next step of the cycle is to mobilise MNEs so that the new technologies that they brought into the country are transmitted to other firms and industries. This is usually achieved through MNEs’ links with domestic firms as well as through their own HRD activities. Note that HRD is not limited to enterprise training but extends further to MNE collaboration with governments, investment promotion agencies (IPA), and domestic enterprises to design and coordinate HRD activities of the country or of the industry. The final step of the circle is for host countries to take advantage of the upgraded skill levels of the economy so that more inward FDI takes place. This is not simply to increase the flow of inward FDI, but to attract higher value-added MNEs, in which the key factor of production is the skilled workforce. To this end, host country governments need to constantly fine-tune policies so that the investment climate adapts in a way that higher value-added MNEs that utilise new skills and information will be attracted.
The objective of this paper is to delve into the vast literature of HRD and FDI in order to identify how this virtuous circle takes place and to seek ways to fine-tune polices to promote it. In doing so, empirical regularities, best practices and numerous policy experiences are extracted from the literature. Surprisingly, there has been a lack of comprehensive survey done on this issue as yet in spite of the growing concern and interest on this issue by policy makers, academics and other stakeholders. Since the major aim of this paper is to capture common regularities in how host developing countries mobilise human resources, it will not cover the whole literature exhaustively.
The paper is organised as follows. The rest of this section summarises questions to be posed throughout the paper. Section II presents background of the issue by summarising recent trends in FDI and HRD in developing countries. The next three sections provide the meat of the paper including: i) attracting inward FDI; ii) human capital formation by MNEs and technology transfers; and iii) the virtuous circle of human capital formation, incoming FDI, and technology transfers. Section VI concludes by revisiting the posed questions and providing directions for future research.
To learn more about this author, visit OECD Development Centre's Website.
Like this article? Share it with your friends
 |
Related Businesses - Evan Elite Authors |
|
Kim Castle
With nearly two decades in the advertising and design business, with clients like Domino's Pizza, General Motors, Direct TV, Pedigree, Wolfgang Puck, Higher Octave Music, Hollywood Celebrity Products, Disney, and Paramount, as well as thousands of entrepreneurs around the world define, structure, communicate, and position their business for greater profits, BrandU(R) co-creators Kim Castle and W. Vito Montone discovered that entrepreneurs could experience the same power that big brands command for a fraction of the cost with the world's only process-based results-drive Integral approach to business creation.
BrandU(R) is helping entrepreneurs grow with the power of extreme clarity from idea...to brand...to market(TM) and helping one million entrepreneurs become successful and whole so that they can make a difference in the world. Are you one of them?
If you want to experience clarity all the way to the bank(TM), get started now at http://www.brandu.com. - Visit Kim Castle's Website |
|
Dr. John Oda
John Oda Ph.D NLP is a business peak performance expert, an author, and speaker frequently called upon to provide corporate training, workshops and seminars for many companies in the United States. He is an expert in coaching sales and business professionals in overcoming the behaviors and obstacles that may impede their sales results and affect their bottom line. Since 1995, John has created a speaking bureau such topics, which include: time management, sales training, human diversity, leadership programs and etc. He provides companies with a strategic plan to increase their bottom line by over 25 percent yearly. - Visit Dr. John Oda's Website |
|
George Ludwig
George Ludwig is a recognized authority on sales strategy and peak performance psychology. An international speaker, trainer, and corporate consultant, he helps clients like Johnson & Johnson, Abbott Laboratories, Northwestern Mutual, CIGNA, and numerous others improve sales force effectiveness and performance.
Though it's George's strategies and processes that help corporations increase productivity and performance, it's his tremendous energy and dynamism that spark the transformation. Again and again, clients remark on his amazing ability to unleash human capacity and inspire men and women to break out of their comfort zones. The result is a whole new type of salesperson.
His customized presentations teach achievers to make stunning advances in their lives. From helping salespeople realize cherished dreams to helping corporations exponentially accelerate revenue streams, George Ludwig leaves audiences and individuals empowered, emboldened, and clamoring for more.
George is the best-selling author of Power Selling: Seven Strategies for Cracking the Sales Code and Wise Moves: 60 Quick Tips to Improve Your Position in Life & Business. - Visit George Ludwig's Website |
|
The Evan Elite Authors program is currently in beta phase. For details please contact us.
|
|
|
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}
