The Impact of Skill Endowments and Collective Bargaining on Knowledge-Intensive Greenfield FDI

Abstract

This paper assesses the contribution of skilled employment and labour market conditions to the ability of attracting knowledge intensive and manufacturing greenfield FDI. We carry out our analysis by controlling for a wide range of labour market features, such as the collective bar- gaining coverage rate, the non-wage labour costs, and the occupational skills of employment. It departs from the existing literature in two respects. First, it deepens the analysis on the ef- fect of labour market regulations and skills endowments on greenfield FDI inflows. Second, it investigates the extent to which labour market characteristics matter for discriminating among 'resource-seeking' and 'efficiency/strategic asset-seeking' greenfield FDI activities (e.g. manufac- turing versus knowledge-intensive foreign investments, respectively). Our empirical analysis suggests that the quality of employment and the technological knowl- edge base have different impact on the location of knowledge-intensive and on low-cost labour- intensive manufacturing foreign investments. Further, associating the collective bargaining cov- erage of unions with the level of regulation in the labour market, our results can provide insights into the effectiveness of labour market policies that aim at attracting knowledge-intensive invest- ments.