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.