FDI and the skill composition of the workforce:

The case of the electronics industry in Hungary

by Harald Trabold

and Kushal Kataria

OVERVIEW

Link between FDI and skills

Possible Outcomes

Research Approach

Results

Link between FDI and skills

Multinationals transfer technology, people and management practices

Local labor force changes skills

Skill upgrade depends on sectoral structure of FDI

Transfer of R&D facilities are especially helpful for upgrading skills

Possible Outcomes

Technology transferred corresponds to relative factor endowments: no changes in skill levels

Technology transferred is geared at using a cheap factor: possibility of skill downgrade

Technology transferred by FDI is more advanced than local technology: skill upgrade

Research Approach

Working Hypothesis: There should be a skill upgrade in the Hungarian electronics industry.

Examine direct impact of multinationals on the skill composition of their staff

Identify multinationals which have:- upgraded production processes- started or extended R&D activities- established training centres

Main source of information:- company reports, company websites

Results

Multinationals set-up R&D facilities, e.g.- Motorola, Nokia, Philips, Siemens- EDS and TATA (software)- Knorr-Bremse (electronic brake systems)

IBM and Hewlett-Packard collaborate in research with Hungarian Universities.

Nokia, IBM, Flextronics operate training centres Cisco runs a software academy

Multinationals in the Hungarian electronics industry upgrade skills of their labor force.