Teaching locals new tricks: Foreign experts as a channel of knowledge transfers

Abstract

Gains from productivity and knowledge transmission arising from the presence of foreign firms have received a good deal of empirical attention, but theoretical micro-foundations for this mechanism are limited. Here we develop a model in which foreign experts may train domestic workers who work with them. Hypotheses are generated under the assumptions that workers learn from experts (the effect of using an expert is not strictly temporary) and that this learning is embodied in the workers rather than in the firm. We use fixed effects and nearest neighbor matching estimators on a panel of plant-level data for Colombia that identifies the use of foreign experts, to show that these experts have substantial and persistent positive effects (though not always immediate) on the wages of domestic workers and on the value added per worker.

FDI productivity spillovers and the technology gap in Malaysia's electrical and electronic industries

“…Labour mobility effects occur when labour employed by the foreign affiliates migrates to domestic firms, or when the labour form their own enterprise. Markusen and Trofimenko () modelled the labour mobility effect and decomposed the gain from training into two types: (1) obtaining knowledge and skills at a lower cost than if they were self‐learnt at home, (2) producing domestic‐skilled workers earlier than if the domestic economy had to rediscover the relevant knowledge.…”

The wider economic impacts of high-skilled migrants: a survey of the literature for receiving countries

“…Such investment may trigger knowledge spillovers between investors and recipients: for example, from skilled investors with sector-specific expertise to recipient firms' (Markusen and Venables 1999;Markusen and Trofimenko 2009;Malchow-Møller et al 2011;Giannetti et al 2012). Over time, migration may also alter the level and pattern of trade and foreign direct investment (FDI) flows between host and home countries.…”

“…Outside Europe and the US, Markusen and Trofimenko (2009) use plant-level data from Colombia to show significant learning externalities from foreign trainers to local workers, which raise native wages and value-added. Similarly, Giannetti et al (2012) look at firms in China who hire directors with foreign experience (returning migrants).…”

Foreign ownership and the export and import propensities of developing‐country firms

“…Foreign owners may help on both fronts, providing know‐how and contacts as well as better access to external finance, thus allowing firms to more easily jump the barriers to exporting or importing. While foreign ownership is only one way to organise this outside support, it is likely to be an important one (see also Markusen & Trofimenko, ).…”