FDI in hot labour markets: the implications of the war for talent


This paper highlights an inherent contradiction that exists within investment promotion activities in rich countries. Since the financial crisis many inward investment agencies have shifted their activities from job creation per se, to seeking to attract investment in high-tech activities. Such knowledge intensive sectors are engaged in what has become referred to as “the war for talent” so locations need to understand their value proposition to firms, especially where labour is tight. This paper explores the implications of this, in terms of the impact on employment and earnings of high skilled labour. We show that, because skill shortages already exist in many of these sectors, seeking to attract inward investment in these sectors simply causes the earnings of such workers to be bid up, and employment in the incumbent sector to fall. We highlight the over-riding importance that firms place on the availability of skilled labour when determining locations, and how policies which to promote labour market flexibility, particularly through investment in skills to address skill shortages, can significantly mitigate the adverse effects, which tend to be more keenly felt in poorer regions of Europe where skilled labour is in even shorter supply.

Divisions: College of Business and Social Sciences > Aston Business School > Economics, Finance & Entrepreneurship
Additional Information: © Springer Nature B.V. 2020. The final publication is available at Springer via http://dx.doi.org/10.1057/s42214-020-00052-y
Publication ISSN: 2522-0691
Last Modified: 29 Nov 2023 12:44
Date Deposited: 30 Mar 2020 07:30
Full Text Link: 10.1057/s42214-020-00052-y
Related URLs: https://link.sp ... 214-020-00052-y (Publisher URL)
PURE Output Type: Article
Published Date: 2020-06-01
Published Online Date: 2020-04-24
Accepted Date: 2020-03-18
Authors: Becker, Bettina
Driffield, Nigel
Lancheros, Sandra
Love, James H.



Version: Accepted Version

| Preview

Export / Share Citation


Additional statistics for this record