3.2 Training of MNC employees
Most MNCs provide some training for their employees, although the amount and type vary
depending on industry, mode of entry, size and time horizon of investment, type of
operations, and local conditions. The level of the host country employees general and
cognitive skills is a particularly important determinant of the amount of training undertaken,
since a relatively high level of education reduces the cost of further training and raises the
expected benefits. Competition is another important factor. Firms that are protected from
international or domestic competition are less likely to invest in costly training programs.
However, the evidence on spillovers from the MNC affiliates training of local
employees is far from complete, and comes mainly from developing country studies.
Considering that knowledge is more scarce at the same time as the public education systems
in developing countries are relatively weaker, it is also possible that spillovers from training
are relatively more important there. However, there is scattered evidence of effects in the
industrialized countries as well, and then perhaps mainly regarding management skills. It is
possible, for instance, that the inter-firm mobility of managers has contributed to spread
specific management practices from Japan to the United States and Europe, and, in earlier
times, from the US to Europe (Caves, 1996). Moreover, casual observation suggests that the
mobility of employees from MNCs in the computer and software industries contributes to
spillovers, both within the industry and elsewhere.
Capability spill overs
Capability Recipients have to connect new knowledge with existing knowledge, and to transform it for applica- tion in their own context. Firms' ability to do so varies as a result of their endowment with resources, especially human capital (Chen, 1996; Chen et al., 2007; Smith et al., 1991). This ability, also known as "absorptive capacity" (Cohen & Levinthal, 1990; Zahra & George, 2002), has been analyzed for specific business units (Lyles & Salk, 1996; Minbaeva, Pedersen, Bjôrkman, Fey, & Park, 2003) and firms (Keller, 1996; Lai, Peng, & Bao, 2006; Rogers, 2004), as well as national economies (Borensztein et al., 1998; Criscuolo & Narula, 2008; Xu, 2000). Absorptive capacity captures firms' ability to utilize acquired knowledge, and thus to increase their realized spillovers. Local firms that lack this capability may be unable to catch up, and may thus be crowded out by foreign investors. Similarly, local firms that only recently started facing foreign competitors, as in transition economies, may lack managerial resources to respond adequately or to raise their productivity (Konings, 2001). This can, at least in the short run, cause excess production capacity and thus low productivity (Aitken & Harrison, 1999). The capability of potential recipient firms is a function of their human capital and their organiza- tional structures that may facilitate innovation and thus enhance the benefits from received knowledge (Blomstrôm & Kokko, 2003; Keller, 1996; Spencer, 2008). Moreover, this capability is closely asso- ciated with the level of income in the economy, which provides firms with the financial resources to acquire complementary resources, and to pay wages that match foreign investors' wages, and thus to benefit from attracting and retaining skilled employees (Aitken, Harrison, & Lipsey, 1996; Gershenberg, 1987). \citep*{Meyer_2009}
Human capital development spillovers
One of the most significant aspects of potentially positive spillovers are those
associated with and through human capital development. There are two modalities by
which MNEs can influence human capital in the host country:
1. Spillovers can occur through direct means, as MNEs contribute to the
generation of employment in the host country, which is to say they increase the employment level quantitatively. At the same time, MNEs
can also cause direct increases in the quality of the domestic workforce, by
providing formal and informal training, as well as through the process of
learning-by-doing to transfer their superior technological knowledge to
their domestic employees.
2. Spillovers can occur through indirect means, also both quantitatively and
qualitatively. On a quantitative level because domestic suppliers and
customers are expected to increase their own employment as a direct
consequence of the increased economic activity due to MNE participation
in the economy. On a qualitative level, firstly because MNEs affiliates are
expected to provide training and technical assistance to domestic suppliers
and, secondly, because domestic firms are expected to have access to more
productive pools of potential employees who have been trained by MNE
affiliates in newer and more productive technologies.
3.1 Direct effects
Human capital development plays a crucial role in the dissemination of
technological knowledge from MNEs to the domestic economy. Indeed, the labour
market is one of the main ways in which new technological knowledge is expected to
disseminate to the domestic economy through two means. First, there should be a tangible
increase in the employment levels of workers in the host location. Second, there is
expected to be an increase in the quality of the workers potentially available to work in
other companies or start their own companies in the same country. This second
opportunity for direct spillovers is through the (expected) provision of formal training
and education to their workers or potential workers. However, there is no concrete
evidence that MNEs always train employees, and where they do so, there is considerable
variance in the quality of this training (for recent reviews, see e.g., Ritchie 2002, JIBICI
2002). Moreover, FDI in certain locations seek unskilled labour to perform simple
assembly-type or resource extractive activities. Although the employment and training of
unskilled labour also provides spillovers, these are regarded as being of a smaller
magnitude, particularly in a middle-income country such as Argentina.
FDI spillovers, absorptive capacities and human capital development:
Evidence from Argentina Narula Marin
Article · February 2003
Firm specific human capital and trainig and general human capital and trainig
Regarding firm-specific training, the firm is
expected to gain at least some of the economic
returns from training that increases productivity
when the human capital is firm-specific (Coff,
1997; Harris & Helfat, 1997; Hashimoto, 1981).
Further, the resource-based approach suggests
that firms are willing to make investments in
firm-specific human capital because the tacit,
complex, and causally ambiguous nature of these
intangible investments makes imitability difficult
(Lippman & Rumelt, 1982; Rumelt, 1984), and
empirical research concerning firm-specific human
capital supports these conclusions (Bidwell, 2011;
Campbell, Saxton, & Banerjee, 2014; Hatch &
Dyer, 2004; Kor & Leblebici, 2005).
Regarding general training, the training literature
as well as corporate practice suggests that advantage
may be captured by the firm under certain
circumstances.
Thus, investments in both general training and
firm-specific human capital training have the potential
to yield sustainable competitive advantage,2
assuming this training is efficacious. One measure
\citep*{Riley_2017}
wstep i pozwiaznai az resourse based view
In the resource-based approach, a firm’s valuable,
rare, inimitable, nonsubstitutable, and organizationally
embedded resources can result in a firm’s superior
financial performance (Barney, 1991; Peteraf,
1993;Wernerfelt, 1984). Investments in human capital
are potential candidates for such resources. The
human capital embodied in employees—whether
at the individual, team, or organizational level—is
intangible and often tacit in nature (Grant, 1996;
Reed & DeFillippi, 1990), which can therefore lead
to imitation barriers (Rumelt, 1984) and to a firm’s
superior economic performance (Amit & Schoemaker,
1993; Chadwick & Dabu, 2009; Makadok,
2001).
Many firms choose to develop human capital
through training employees. Existing research suggests
that such investments are likely to lead to superior
financial performance when the human capital
is firm-specific (Coff & Raffiee, 2015; Crook, Todd,
Combs, Woehr, & Ketchen, 2011; Mayer, Somaya,
1896 S. M. Riley, S. C. Michael, and J. T. Mahoney
&Williamson, 2012;Wang, He,&Mahoney, 2009).
In contrast to firm-specific human capital, however,
general training, defined as building human
capital in the employee that has value both to the
training firm and to other firms, is not expected to
improve the training firm’s financial performance
because of the firm’s inability to capture the value.
Specifically, general training would be a financial
drain on the training firm while enabling mobility of
the employee (Becker, 1964). General training thus
fails the test of valuable, rare, inimitable, nonsubstitutable,
and organizationally embedded (Barney,
1991; Grant, 1996).
Human capital theory (Becker, 1964) posits that
human capital investments in the training and education
of employees can have positive economic
value because they develop and nurture the knowledge
and skills of these employees, thereby improving
their productivity. Such a definition of human
capital includes formal education, work experience,
workplace instruction, and on-the-job training
(Miller, Xu, & Mehrotra, 2015; Shaw, Park,
& Kim, 2013). Consistent with theory, investments
in human capital have been shown to positively
influence productivity-related measures (Bartel,
1994; Ichniowski, Shaw, & Prennushi, 1997;
Lepak & Snell, 1999; Sepulveda, 2010). However,
whether these human capital investments have a
positive impact on firms’ financial performance is
unclear (Almeida & Carneiro, 2009; Bartel, 2000;
Frank & Obloj, 2014; Jones, Kalmi, & Kauhanen,
2012).
Parent company and thier subsidiaries.
Knowledge creation and transfer
The study of knowledge diffusion- (and, later on, creation-)
related processes in MNCs is another important area of the
journal’s contributions to the literature on HQS relationships.
Consistent with its early focus on HQs and issues of organizational
design, earlier work explored HQs’ efforts to transfer knowledge to
subsidiaries (e.g., Richman & Copen, 1973). However, as more
complex subsidiary-centered models of MNC management
emerged, CJWB published articles focused on subsidiary capabilities,
their knowledge creation potential, and the growing importance
of local/regional innovation centers within the broader
organization. For example, instead of knowledge transfer per se, a
number of articles examined knowledge coordination efforts
across multiple host countries (e.g., Williams & Lee, 2011). Others
studied reverse knowledge transfer, that is, transfer from foreign
subsidiaries back to parent companies (e.g., Edwards & Tempel,
2010), which has been a topic of growing interest in the general IM
literature (e.g., Govindarajan & Ramamurti, 2011; Immelt,
Govindarajan, & Trimble, 2010). Reverse diffusion was identified
as a mechanism by which foreign operating units can enhancetheir status and claim on resources, as well as help the organization
as a whole to strengthen its competitive position (Edwards &
Tempel, 2010). The relevance of these models was further
increased by the addition of certain contingencies. For example,
Rabbiosi and Santangelo (2013) examined the moderating role of
subsidiary age on the benefits that accrue to HQs from reverse
knowledge transfer and argued that knowledge from older
subsidiaries is usually viewed as more beneficial by the parent
company than knowledge from younger subsidiaries.
In an effort to further unpack the drivers and facilitators of
knowledge creation and coordination in MNCs, other scholars
studied the microfoundations of these processes, by building in
particular on prior work on the role of international managers as
boundary-spanners between the center and the periphery of the
organization (e.g., Johnson & Duxbury, 2010; Klitmøller & Lauring,
2013; Tippmann, Scott, & Mangematin, 2014; Zander, Mockaitis, &
Butler, 2012). Other papers explored the consequences of
knowledge transfer for foreign subsidiaries (e.g., Chen, Chen, &
Ku, 2012; Ciabuschi, Dellestrand, & Kappen, 2012; Fang, Wade,
Delios, & Beamish, 2013; Najafi-Tavani, Giroud, & Andersson,
2014). More recently, scholars have begun to explore language and
its role in knowledge transfer efforts in MNCs – a topic of growing
importance in the broader IM field as well (Harzing & Pudelko,
2013). This novel approach to the study of micro-level processes in
organizations has shed new light on the challenges to knowledge
creation and diffusion in MNCs (Harzing et al., 2011; Heikkila¨ &
Smale, 2011; Yamao & Sekiguchi, 2015). For example, Barner-
Rasmussen and Aarnio (2011) found that MNCs are indeed
multilingual, but that language fluency varies significantly across
functions and organizational levels. This finding has important
implications for communication, knowledge sharing, and viability
of formal language strategies in MNCs.
Human capital
Extant strategy theory suggests that human
capital can be a source of sustained competitive
advantage (Coff, 1997; Hall, 1993), but only if
isolating mechanisms prevent workers from tak-
ing their valuable knowledge and skills to rival
firms (Barney, 1991; Rumelt, 1984). One of the
most important isolating mechanisms is firm-
specific human capital— knowledge and skills
embodied in individuals that cannot be easily
applied in other firms (Buchholtz, Ribbens, &
Houle, 2003; Hatch & Dyer, 2004; Kor & Leblebici,
2005). Built on Becker’s (1964) seminal work, the
prototypical logic in the strategy literature is
that firm-specific human capital limits individ-
uals’ mobility whereas general human capital
does not. Thus, firm-specific human capital is
assumed to support sustained competitive ad-
vantage. Likewise, general human capital is as-
sumed not to support sustained advantage since
mobility threats allow workers to appropriate
the rents associated with their skills and
thereby erode any advantages.