Foreign investors are expected to contribute to economic development through a variety of channels. However, many foreign investment operations are small, and almost insignificant in their impact on the local environment. An important indication of the potential contribution of foreign investors is thus their employment growth. Employees working for, and trained by, a multinational enterprise may become carriers of new technology and business practices. The more employees receive access to new knowledge, the more they in turn may spread the knowledge across the economy, for instance by setting up their own businesses. This paper makes a first step in investigating the determinants of this important mediating variable, employment growth. For a dataset covering four diverse emerging economies (Egypt, India, South Africa and Vietnam), it is found that wholly-owned FDI operations have higher employment growth, while local industry characteristics moderate the growth effect.
Discussion Paper Series, Centre for New and Emerging Markets, London Business School, No. 37, London, UK, 27 pp.