Working Paper: CEPR ID: DP3762
Authors: Magnus Blomström; Ari Kokko
Abstract: After a review of the literature, we conclude that there is potential for significant ?spillover effects? from FDI into host countries. We identify some limitations of this potential, however, to do with the stock of human capital, the interest in local firms of promoting skills transfer and the competition environment. We suggest comparing conditions and effects between regions, particularly between East Asia and Latin America, where transfer in the former has been more consistent than in the latter. We propose further that an analysis of the type of FDI flowing to different regions and countries could provide clues to the potential for maximizing the gains to local skills accumulation. Finally, studies are needed which examine the nature of skills provided by FDI, and ways in which training institutions, business schools, for example, can complement in-service training by firms in FDI host countries.
Keywords: FDI; MNCs; spillovers
JEL Codes: J23; O12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| FDI (F23) | knowledge spillovers to local labor force (J24) |
| human capital level (J24) | extent of knowledge spillovers (O36) |
| higher human capital (J24) | attract technology-intensive FDI (F20) |
| technology-intensive FDI (F20) | greater skill development (J24) |
| lower human capital (J24) | attract simpler technology FDI (F20) |
| simpler technology FDI (F20) | contributes less to local skill enhancement (J24) |
| training by MNCs (M53) | spillover into broader economy (F69) |
| trained employees moving (J62) | spillover into other firms or businesses (L19) |
| nature of FDI (F23) | extent of spillovers (F69) |
| FDI (F23) | impact on local productivity (F69) |
| local firms engagement (F23) | absorb foreign knowledge (O36) |