Foreign Direct Investments in Serbia and Future Role of Human Capital

International capital flows, transfer of real and financial funds between different countries’ legal entities became very intensive after WWII. Importance of foreign investments in the world market is continuously growing since. The level of foreign investments has significantly fluctuated during last few decades worldwide, which is directly correlated to business activities life cycle. Today with the world economic crisis influencing world economy, the level of foreign investments has dramatically diminished. This trend is also present in Serbian economy. This paper will show an alternative source of increasing country’s attractiveness for foreign investments through increase of the value of human capital. Many authors note that multinational companies in their investments decision process start with the analysis of the availability of high level of human capital. What is the exact level of human capital (education and skills) required is the questions which have to be discussed in order to facilitate inflow of foreign capital, especially in transition countries. On of the key motivators for transition countries’ wish for attracting foreign capital is the transfer of technology. Transferability of technology is directly related to host country approach to defining national development strategies and policies. We use econometric analysis of data from countries which have already gone through transition process, follow the trends of foreign investments, and divide them into mergers and acquisitions on the one side and Greenfield investments on the other side. Finally we present findings of the other authors’ research on this topic, as well as the level of human capital required to boost FDI.