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Foreign Direct Investments and Spillovers through Workers' Mobility

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Author Info
Andrea Fosfuri
Massimo Motta
Thomas Ronde

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Abstract

We analyze a model where a multinational firm can use its superior technology in a foreign subsidiary only after appropriate training of local managers. Technological spillovers from foreign direct investment arise when such managers are later hired by a local firm. Benefits for the host economy may also take the form of the rent that trained managers receive by the foreign affiliate to prevent them from moving to local competitors. We study conditions under which technological spillovers occur. We also show that under certain circumstances the multinational firm might find it optimal to resort to export instead of foreign direct investment, to avoid dissipation of its intangible assets.

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Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 258.

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Date of creation: Jan 1998
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Handle: RePEc:upf:upfgen:258

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Related research
Keywords: Multinational corporations; externalities; training; labor mobility;

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Find related papers by JEL classification:
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
J63 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Turnover; Vacancies; Layoffs
O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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  1. d'Aspremont, Claude & Jacquemin, Alexis, 1988. "Cooperative and Noncooperative R&D in Duopoly with Spillovers," American Economic Review, American Economic Association, vol. 78(5), pages 1133-37, December. [Downloadable!] (restricted)
  2. Budd, Christopher & Harris, Christopher & Vickers, John, 1993. "A Model of the Evolution of Duopoly: Does the Asymmetry between Firms Tend to Increase or Decrease?," Review of Economic Studies, Blackwell Publishing, vol. 60(3), pages 543-73, July. [Downloadable!] (restricted)
  3. Audretsch, David B & Feldman, Maryann P, 1996. "R&D Spillovers and the Geography of Innovation and Production," American Economic Review, American Economic Association, vol. 86(3), pages 630-40, June. [Downloadable!] (restricted)
  4. Aitken, B. & Harrison, A. & Lipsey, R.E., 1995. "Wages and Foreign Ownership: A Comparative Study of Mexico, Venezuela, and the United States," Papers 95-21, Columbia - Graduate School of Business.
    Other versions:
  5. Motta, M., 1996. "Multinationals without Advantages," Research Institute of Industrial Economics Working Papers 464, Research Institute of Industrial Economics (IFN).
    Other versions:
  6. Blomström, Magnus & Kokko, Ari, 1996. "Multinational Corporations and Spillovers," Working Paper Series in Economics and Finance 99, Stockholm School of Economics.
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  7. Horstmann, Ignatius J & Markusen, James R, 1996. "Exploring New Markets: Direct Investment, Contractual Relations and the Multinational Enterprise," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(1), pages 1-19, February.
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  8. Gershenberg, Irving, 1987. "The training and spread of managerial know-how, a comparative analysis of multinational and other firms in Kenya," World Development, Elsevier, vol. 15(7), pages 931-939, July. [Downloadable!] (restricted)
  9. Horstmann, Ignatius J. & Markusen, James R., 1992. "Endogenous market structures in international trade (natura facit saltum)," Journal of International Economics, Elsevier, vol. 32(1-2), pages 109-129, February. [Downloadable!] (restricted)
  10. Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 546-554, Winter. [Downloadable!] (restricted)
  11. Georges Siotis, 1999. "Foreign Direct Investment Strategies and Firms' Capabilities," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 8(2), pages 251-270, 06. [Downloadable!] (restricted)
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  12. Ignatius J. Horstmann & James R. Markusen, 1990. "Endogenous Market Structures in International Trade," NBER Working Papers 3283, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  13. Lall, Sanjaya, 1980. "Vertical Inter-Firm Linkages in LDCs: An Empirical Study," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 42(3), pages 203-26, August.
  14. Ethier, Wilfred J. & Markusen, James R., 1996. "Multinational firms, technology diffusion and trade," Journal of International Economics, Elsevier, vol. 41(1-2), pages 1-28, August. [Downloadable!] (restricted)
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