Introduction: HUMAN CAPITAL FORMATION AND FOREIGN DIRECT INVESTMENT IN DEVELOPING COUNTRIES
Introduction: HUMAN CAPITAL FORMATION AND FOREIGN DIRECT INVESTMENT IN DEVELOPING COUNTRIES
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.
Introduction HUMAN CAPITAL FORMATION AND FOREIGN DIRECT INVESTMENT IN DEVELOPING COUNTRIES - To learn more about this author, visit OECD Development Centre's Website.
Like this article? Share it with your friends
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.
Introduction HUMAN CAPITAL FORMATION AND FOREIGN DIRECT INVESTMENT IN DEVELOPING COUNTRIES - To learn more about this author, visit OECD Development Centre's Website.
Like this article? Share it with your friends
 | |
 |
No article feedback found. |
| |
Leave Your Feedback |
 | |
| |||
John PowerJohn Power, founder of Biltmore Franchise Consulting, has extensive experience developing and marketing franchises and business opportunities. He has been in and around franchising for over twenty years. From 1980 through 1990 he conceptualized, organized, and developed the American Video Association. He grew AVA to 2,000 national members, before selling the company it 1990. It was later merged into another home video marketing company. From 2000 to 2005 he worked as a contract marketing and human resources consultant to several local and national companies. In 2005 Mr. Power began working as a franchise development consultant on a full-time basis. Since that time he has helped more than three dozen companies initiate and develop their franchising program. He notes that there are many companies interested in developing a franchise program, and who need his specialized assistance. Mr. Power is a “hands-on” franchise consultant. He said, “I am the ‘nuts and bolts’ person who tends to the details for my clients.” Mr. Power holds a B.S. degree with a major in Marketing. See: www.biltmorefranchise.com You may contact Mr. Power at: jpower@biltmorefranchise.co - Visit John Power's Website |
|||
Stephanie RobeyStephanie Robey is President and CoFounder of Pivot Positive, LLC - an Internet marketing business focused on helping people start work at home ventures. Previously, she was employed at The Search Agency with over 20 years experience in graphic design and 10 years experience in online marketing. She was responsible for launching the Conversion Path Optimization (CPO) unit where she and her team have conducted hundreds of optimization tests for online companies across multiple verticals. She is a successful entrepreneur having started and sold 2 companies and remains on the board of directors of the third, PhotoSpin.com Stephanie began her career in the direct marketing realm creating and producing direct mail for many of the major cable television companies and directly attributes her understanding of Internet marketing to those early offline experiences. Stephanie is a graduate of San Diego State University with a BFA in Graphic Arts and also holds an Executive MBA from the Graziadio School of Business and Management at Pepperdine University. Read Steph's Blog Meet Steph and Dave Sign up for our Free 7-Day BootCamp: Self Employed & Rich - Visit Stephanie Robey's Website |
|||
John AlexanderJohn has taught keyword research and SEO skills to small groups of business owners and Webmasters from over 80 different countries world wide since 2002. John is also the Director of Search Engine Academy ; Co-director of Training at Search Engine Workshops offering live, SEO Workshops with his partner SEO educator Robin Nobles, author of the very first comprehensive online search engine marketing courses at SEO Training Online and the SEO Workshop Resource Center. I look forward to hearing from you! - Visit John Alexander's Website |
|||
Leanne Hoagland-SmithAre your sales where you want them to be? Will you be one of the few who achieves sales or business success or one of the many who have failed to change? Are you tired of being told you are like everyone else? Then you may find my first book on sales of interest. Be the Red Jacket in the Sea of Gray Suits, The Keys to Unlocking Sales available at Amazon or at http://www.processspecialist.com/red-jacket.htm. This book is a reflection of my no-nonsense approach to improving sales to overall business results. If you are truly committed to making sustainable changes, then I can help you secure a positive return on your investment because I focus on executable solutions not telling you the problems you already know you have. From training to corporate (group) coaching to executive one on one coaching, my approach is to assess, create awareness, build a goal driven action plan and then execute. The bottom line question is "Not do you or your employees know it, but do you or they want to do it?" Please call for a free strategy session at 219.759.5601. - Visit Leanne Hoagland-Smith's Website |
|||
Cheryl MatthynssensCheryl is a life skills coach, licensed Chemical Dependency Counselor and a 20 year entrepreneur. Cheryl's dedication to achieving a life of balance led to her expanding her teaching from the simple managing of life's daily challenges to adding financial well being as well. A direct marketer with DrinkACT, she is gaining ground in the online community with her concepts of making sure business owners, entreprenuers and employees have well rounded life styles. She opened up a small affiliate site - The Balance Guide- to help others find resources for mental and emotional well being. Visit Cheryl's blog to see more of the diversity beyond business she has began offering online at www.thebalanceguide.blogspot.com - Visit Cheryl Matthynssens's Website |
|||
Kim CastleWith 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 |
|||
Jay Kubassek(Jay's Full Bio: EvanCarmichael.com/jaykubassek) In five years, Canadian-born entrepreneur Jay Kubassek went from selling mufflers at a Midas franchise to revolutionizing Internet marketing with the 2004 launch of CarbonCopyPRO, a online marketing education company, now worth over $20 million with customers in over 160 countries.
As an independent film producer, his upstart film fund Aliquot Films is currently producing a films with Spike Lee and Abel Fererra (starring Ethan Hawke and Dennis Hopper.)
Jay's entrepreneurial spirit is irrepressible. He’s the owner of five companies, a professional speaker and trainer, international real estate developer/investor, extreme sport enthusiast and emerging philanthropist. Jay resides in NYC with his wife Jamie, son Milo and dog Cooper. Visit Jay's official website: www.JayKubassek.com - Visit Jay Kubassek's Website |
|||
George LudwigGeorge 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 |
|||
|
To learn more about the Evan Elite Author Program please contact us. | |||
 | |
|  |
Subscribe to OECD's articles
 | |
|
|  |
 | |
|
| |
 | |||||||
|
 | ||
 |
||
 |
||
 |
||
|
| ||
 |
| Have you written articles that would be of value to entrepreneurs? Become an expert on our site by publishing them! Expose yourself to a wide audience, drive more traffic to your website and get more sales! Click Here for details. |
|
|
 |
| Modeling the Masters: Learn the true secrets behind Walt Disney's business success factors & grow your company! Video produced by Phanta Media |
|
|
 |
"Learn straight from Evan how you can Make a Full Time Income (And More) from a Website"
Click Here To Learn More |
|
|
|
|
Get advice & tips from famous business owners, new articles by entrepreneur experts, my latest website updates, & special sneak peaks at what's to come!
|
|
|
 New Year Revolutions Maslow For Entrepreneurs Google Adwords Guide NichePreneur Mindset Easy Product Ideas |
|
 | ||
 |
Top 50 Marketing Blogs
Top Blogs To Watch In 2008 | |
 |
Top 50 Marketing Blogs
Top Marketing Blogs of 2010 | |
| ||
 | ||||
| ||||
|
| ||||
| ||||
|
|
|
|
|
||||||||||||
|
Email us your ideas on how to make our website more valuable! Thank you Sharon from Toronto Salsa Lessons / Classes for your suggestions to make the newsletter look like the website and profile younger entrepreneurs like Jennifer Lopez and Sean Combs!
|
|
|
| ||||||||||||
| ||||||||||||
|
|
||||||||||||