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Is Human Capital a Significant Determinant of Portugal’s FDI Attractiveness?

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Author Info
Ana Teresa Tavares () (CEMPRE, Faculdade de Economia, Universidade do Porto)
Aurora A.C. Teixeira () (CEMPRE, Faculdade de Economia, Universidade do Porto)

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Abstract

The paper tests whether human capital is a relevant foreign direct investment (FDI) determinant. Drawing on a large-scale survey of firms located in Portugal, and controlling for firms’ structural (i.e. size, age and industry), strategic (R&D and export intensities) and linkages (density of university contacts) variables, our key finding is that, indeed, human capital exerts a positive and significant influence on FDI attraction. Relevant policy implications emerge from the results of this study, at two main levels: (i) policies intended to stimulate human capital formation; and (ii) as regards FDI-focused policies. These policies are discussed in the light of the Portuguese case.

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Publisher Info
Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series FEP Working Papers with number 211.

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Length: 28 pages
Date of creation: May 2006
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Handle: RePEc:por:fepwps:211

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Related research
Keywords: Foreign direct investment (FDI) multinational enterprises (MNEs) human capital education skills R&D-performing firms.

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Find related papers by JEL classification:
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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  1. Blomström, Magnus & Kokko, Ari, 2003. "Human Capital and Inward FDI," CEPR Discussion Papers 3762, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  2. Root, Franklin R & Ahmed, Ahmed A, 1979. "Empirical Determinants of Manufacturing Direct Foreign Investment in Developing Countries," Economic Development and Cultural Change, University of Chicago Press, vol. 27(4), pages 751-67, July.
  3. Koen De Backer & Leo Sleuwaegen, 2005. "A closer look at the productivity advantage of foreign affiliates," International Journal of the Economics of Business, Taylor and Francis Journals, vol. 12(1), pages 17-34, February. [Downloadable!] (restricted)
  4. Guest Editors: Ana Teresa Tavares & Stephen Young, 2005. "FDI and multinationals: patterns, impacts and policies," International Journal of the Economics of Business, Taylor and Francis Journals, vol. 12(1), pages 3-16, February. [Downloadable!] (restricted)
  5. Dirk Willem te Velde, 2002. "Government Policies for Inward Foreign Direct Investment in Developing Countries: Implications for Human Capital Formation and Income Inequality," OECD Development Centre Working Papers 193, OECD Development Centre. [Downloadable!]
  6. Caves, Richard E, 1974. "Causes of Direct Investment: Foreign Firms' Shares in Canadian and United Kingdom Manufacturing Industries," The Review of Economics and Statistics, MIT Press, vol. 56(3), pages 279-93, August. [Downloadable!] (restricted)
  7. Wood, Adrian & Ridao-Cano, Cristobal, 1999. "Skill, Trade, and International Inequality," Oxford Economic Papers, Oxford University Press, vol. 51(1), pages 89-119, January.
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  9. Joana Costa & Aurora A. C. Teixeira, 2005. "Universities as sources of knowledge for innovation.The case of Technology Intensive Firms in Portugal," FEP Working Papers 181, Universidade do Porto, Faculdade de Economia do Porto. [Downloadable!]
  10. Zhang, Kevin Honglin & Markusen, James R., 1999. "Vertical multinationals and host-country characteristics," Journal of Development Economics, Elsevier, vol. 59(2), pages 233-252, August. [Downloadable!] (restricted)
    Other versions:
  11. Matthew J. Slaughter, 2002. "Skill Upgrading in Developing Countries: Has Inward Foreign Direct Investment Played a Role?," OECD Development Centre Working Papers 192, OECD Development Centre. [Downloadable!]
  12. Christian Bellak, 2004. "How Domestic and Foreign Firms Differ and Why Does it Matter?," Journal of Economic Surveys, Blackwell Publishing, vol. 18(4), pages 483-514, 09. [Downloadable!] (restricted)
    Other versions:
  13. Pfeffermann, G.P. & Madarassy, A., 1992. "Trends in Private Investment in Developing Countries," Papers 16, World Bank - International Finance Corporation.
  14. Gary S. Becker, 1962. "Investment in Human Capital: A Theoretical Analysis," Journal of Political Economy, University of Chicago Press, vol. 70, pages 9. [Downloadable!] (restricted)
  15. Hanson II, John R., 1996. "Human Capital and Direct Investment in Poor Countries," Explorations in Economic History, Elsevier, vol. 33(1), pages 86-106, January. [Downloadable!] (restricted)
  16. Almeida, Paul & Dokko, Gina & Rosenkopf, Lori, 2003. "Startup size and the mechanisms of external learning: increasing opportunity and decreasing ability?," Research Policy, Elsevier, vol. 32(2), pages 301-315, February. [Downloadable!] (restricted)
  17. Noorbakhsh, Farhad & Paloni, Alberto & Youssef, Ali, 2001. "Human Capital and FDI Inflows to Developing Countries: New Empirical Evidence," World Development, Elsevier, vol. 29(9), pages 1593-1610, September. [Downloadable!] (restricted)
  18. Laursen, Keld & Salter, Ammon, 2004. "Searching high and low: what types of firms use universities as a source of innovation?," Research Policy, Elsevier, vol. 33(8), pages 1201-1215, October. [Downloadable!] (restricted)
  19. Lucas, Robert E, Jr, 1990. "Why Doesn't Capital Flow from Rich to Poor Countries?," American Economic Review, American Economic Association, vol. 80(2), pages 92-96, May. [Downloadable!] (restricted)
  20. Kyoji Fukao & Toshiyasu Izawa & Morio Kuninori & Toru Nakakita, 1994. "R&D Investment and Overseas Production: An Empirical Analysis of Japan's Electric machinery Industry Based on Corporate Data," Discussion Paper Series a300, Institute of Economic Research, Hitotsubashi University.
  21. Aurora A.C. Teixeira & Joana Costa, 2006. "What type of firm forges closer innovation linkages with Portuguese Universities?," FEP Working Papers 207, Universidade do Porto, Faculdade de Economia do Porto. [Downloadable!]
    Other versions:
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