Multinationals, competition and productivity spillovers through worker mobility

Abstract

Spillovers can arise when multinational …rms (MNEs) train local employees who later join domestic …rms, bringing with them part of the technological, marketing and man- agerial knowledge that they have acquired. Theoretical models by Fosfuri et al (2001) and Glass and Saggi (2002) suggest that the direction and the intensity of the mobility of trained workers is aected by market conditions including the degree of product market competition. This, in turn, details an additional channel through which competition is likely to aect total factor productivity. In this paper, we take this hypothesis to the data for the …rst time by using the Finnish longitudinal employeer-employee data. We …rst quantify the importance of spillovers via worker mobility by estimating augmented production functions. Second, we estimate several competing risks models to assess the impact of product market competition and absorptive capacity on worker mobility. We …nd that productivity spillovers arise only when workers move from domestic-owned multi- national …rms to domestic local …rms. The spillover eects are economically important. Further, our results point out that competition aects the productivity spillovers of purely domestic plants adversely by reducing worker mobility.