Impact of inward and outward FDI on employment: the role of strategicasset-seeking FDI

Abstract

Due to accelerating employment shifts from industry sector to the services sector, this study raises the question of whether foreign direct investment (FDI) affects sector employment shifts in host country and home country. The study presents a mediation model that includes three location factors – information and communications technology (ICT), educated labour, and economic and political stability – to show the effects of FDI inward (FDII) and FDI outward (FDIO) on employment in industry and service sectors in 33 advanced countries (ACs) versus 116 developing and emerging countries (EDCs). The results show that FDII and FDIO in ACs lead to employment shifts from industry sector to the service sector, while only FDII in EDCs leads to employment shifts from the service sector to industry sector. The study highlights the complex challenges faced by labour markets in either ACs or EDCs. In EDCs, the main challenge lies in creating an environment that provides a combination of economic and political stability, a supply of educated labour, and an advanced ICT infrastructure to encourage FDI and the creation of new jobs. While in ACs, strategic asset-seeking FDI could serve as an ‘engine’ for developing and marketing innovative products to create new jobs for educated labour. The study emphasises the need for strategic asset-seeking FDI to encourage FDI in terms of employment, both in ACs and EDCs.

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