Inward FDI skilled labour, and product differentiation in the CEEC

Abstract

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The level of human capital in innovative firms located in China. Is foreign capital relevant?

“…Thus, contrarily to the studies that concluded that there was a positive FDI impact, not only on the demand (Rutkowski 2006), but also on an increase in the offer of qualified labour (Slaughter 2002, Narula and Marin 2003, Cheung and Lin 2004, our study did not find any evidence supporting the idea that multinational firms have a higher level of human capital (formal education). Indeed, this relationship proved to be negative (Model 1), thus suggesting that FDI on its own does not seem to contribute to an increase in the level of human capital in the country.…”

“…11 In our study, the level of R&D is measured in terms of the ratio of the firm's R&D expenses in the total sales (cf. Long and Ravenscraft 1993, Belderbos et al 2004, Rutkowski 2006. The size of the firm is measured in terms of number of workers (cf.…”

“…Beugelsdijk and Cornet 2002, Belderbos et al 2004, Veugelers and Cassiman 2005. The firm's age is calculated based on the number of years of activity (Rutkowski 2006), and the level of exports is measured through the firm's export ratio in total sales (cf. Veugelers and Cassiman 2005).…”

“…Furthermore, local firms may also benefit from a supply of more skilled workers, trained by multinational firms. For instance, according to Rutkowski (2006), foreign firms aiming to exploit their sophisticated assets locally tend to hire qualified people, having observed, in a study performed on 13 Central and Eastern European countries, that foreign firms employ a larger percentage of graduates in comparison to domestic firms. However, recent studies (Ritchie 2002, Barry et al 2004, McDonnell 2008) have revealed that foreign firms do not always provide more training than local firms.…”

Is human capital relevant in attracting innovative foreign direct investment to China?

“…The following are also considered as control variables: the firm's size, measured in terms of number of workers (Bob, René, Bert, and Roy 1997); the firm's age, calculated by the number of years the surveyed firms have been in activity (Rutkowski 2006); and the level of exports, measured from the ratio between each firm's exports on the sales value (Estrin, Meyer, Wright, and Foliano 2008). 4 The empirical results obtained from the estimation are shown on Table 1.…”