Paper #258

Title:

Foreign direct investments and spillovers through workers' mobility

Authors:

Andrea Fosfuri, Massimo Motta and Thomas Ronde

Date:

January 1998

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.

Keywords:

Multinational corporations, externalities, training, labor mobility

JEL codes:

F23, J63, O12

Area of Research:

Microeconomics

Published in:

Journal of International Economics, 53, pp. 205-222, 2001

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