The Effect of Human Capital Flow on Fdi Technological Advances

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The Effect of Human Capital Flow on FDI Technological Advances :
An Empirical Study Based on Absorptive Capacity
Abstract Human capital flow is an important factor that affecting the “absorptive capacity” of host countries, it is of great significance to strengthen the host countries’ absorptive capacity of FDI technology spillovers. Taking China for example, this paper made an empirical analysis about the effect of human capital flows on FDI technological advances, we selected the number of foreign students and the number of students that return home, as well as the employment rate of foreign Enterprise as proxy indicators of human capital flows, using data envelopment analysis (DEA) to measure the technological progress of China. The empirical results showed that: FDI and human capital flows, combined with technological advances were positively correlated, but the positive effect was not significant. China should improve the quality and enhance the overall level of human capital flows, in order to create a superior environment of qualified personnel for FDI technology spillover.
Key words Human Capital Flows, FDI Spillover, Absorptive Capacity
I. Introduction
The new theory of economic growth suggests that, technological progress is the driving force of economic growth. Subject to their own capacity of innovation constraints, FDI technology diffusion is an important source of technological progress in developing countries. The degree of FDI technology spillovers is closely related to the absorptive capacity of host countries.
By sorting out the literature at home and abroad, we find that the situation of host country’s human capital flows is a very important aspect of FDI technological absorptive capacity, which can restrain or enlarge the technology spillover effect of FDI by staff mobility between TNCs and local enterprises, multinational companies and personnel training input (cost savings), competition among enterprises and other channels.



References: [1] Arrow, Kenneth, J., “The Economic Implications of Learning by Doing,” Review of Economic Studies, 1962 , (29) . [2] BIN XU., “Multinational Enterp rises Technology Diffusion and Host Country Productivity Growth,” Journal of Development Economics, 2000, 62: 477 - 4931. [3] Borensztein, E. Gregorio, J. D. and Lee, J. W., “How does Foreign Direct Investment Affect Economic Growth?,” Journal of International Economics, 1998, Vol. 45, pp. 115-135. [4] Blomstrom, A [5] Daron Acemoglu, “Directed Technical Change,” NBER Working Paper, NO. 8287. [6] Guo-Min Li, Qiu Shi. “Indirect financing the region 's financial markets and foreign direct investment are spillover effects,” Economic Theory and Economic Management, 2007, 6. [7] Liu Zhiming, Shen Jian-Bo. “Foreign direct investment technological spillover effect, influencing factors and China’s policy options,” the economic aspect, 2006, 12. [8] Li Ping, Liu. “FDI, foreign patent applications with China in various regions of the technological advances-International technology diffusion perspective empirical analysis,” international trade issues, 2006, 7. [9] Ravenstein,E.G., “The Law of Migration,” Journal of the Statistical Society, 1889, (52).

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