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Abstract:
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It is nowadays generally accepted that inward foreign direct investment (FDI) is crucial
as a source of technological spillovers. One of the objectives of this paper is to review the
evidence on the quantity and quality of human capital employed by domestic and foreign
firms. We examine whether spillovers accrue from MNE activity, and provide a
preliminary understanding of why MNE spillovers remain somewhat ambiguous,
particularly in developing countries, paying particular attention to human capital
development. Our analysis is supported by data from the Innovation Survey in Argentina.
On the whole, MNE subsidiaries hired more professionals than domestic firms of the
same size, possessed a more skilled labour force overall, and spent more on training than
similar domestic firms. Subsidiaries in Argentina effectively have a higher labour
productivity and pay higher wages. Yet, in terms of knowledge creation and utilisation,
there was little to differentiate affiliates from domestic firms.
While there is little evidence of widespread FDI spillovers, where spillovers did
occur, it was where domestic firms demonstrated high investment in absorptive
capacities. Our analysis also suggests that much of MNE activity - particularly after
liberalisation - has been of the kind that by definition has limited opportunities for
linkages and spillovers. These are activities in which MNEs may simply be able to
generate economic rent from their superior knowledge of markets, and their ability to
efficiently utilise their multinational network of affiliates. These assets are not generally
easily spilled over to domestic firms. |
This work is licensed under a Creative Commons License.
