The role of skilled migrant workers in FDI-related technology transfer

Abstract

In this paper, we analyse the role of skilled migrant workers holding managing and expert positions in the effective transfer of technology by multinational enterprises (MNEs) to their local affiliates. In the context of multiple treatments, i.e. foreign ownership and skilled migrant worker appointment, and based on propensity score matching and the difference-in-differences approach for matched employer–employee Slovenian firm level data for the 2002–2010 period, it is established that foreign-owned firms which, along with foreign direct capital inflow (FDI), appoint foreign skilled workers to managing or expert positions indeed perform better in TFP growth terms than firms that only experience FDI. The results are even more robust and significant where FDI activity is followed by the employment of a parent-country-national (PCN) manager, suggesting that expat managers play a key role in effectively transferring knowledge within MNEs. PCN managers and foreign experts appear to be crucial in explaining the productivity advantage over the domestic counterparts, with the former having a more immediate effect and the latter becoming important over a longer time. In contrast, no evidence was found regarding the technology transfer associated with either direct capital inflow alone or in connection with the employment of foreign unskilled workers.