International human capital mobility and FDI: Evidence from G20 countries

Human talent will be (or is already) scarce. We view international students as the source of high-skilled labour force, which satisfies the skill and task requirement of firms, particularly those anticipating overseas expansion, and argue whether the international student stock in a country is an indication of positive future prospect for the acquiror country in cross-border mergers. Using the international students’ stocks between pairs of acquiror countries of origin and target firms’ countries for bilateral mergers and acquisitions (M&A) activities, we exploit the within variation of both bilateral M&A activities and bilateral international student stocks between G20 countries. The formation of human capital signals that potential acquirors can access skilled workers and boosts the bilateral M&A activities. Results further indicate that the marginal effect of international students from target country in acquiror country has larger impact than that from acquiror country in target country.