HumanCapitaland fdi inCentral
and Eastern Europe
AgnieszkaDorożyńska
University of Lodz, Poland
adorozynska@uni.lodz.pl
TomaszDorożyński
University of Lodz, Poland
tdorozynski@uni.lodz.pl
Theaimofthispaperistoassesstheroleofhumancapitalinattractingfdi
inthelightofselectedempiricalstudiesconductedinPolandandglob-
ally.Theliteratureonfactorsdeterminingfdilocation,includingthose
relatingtotheimportanceofhumancapital,isdominatedwithstudiesat
nationalorsupranationallevel.Attractingforeigninvestmenthasbecome
akeycomponentofnationalstrategiesfortheceecountries.Thepaper
makesanattempttoassesstherelevanceofhumancapitalforfdiinflow
atregionalandlocallevelsinPoland.Atthesametime,resultsofanal-
yseswerecontrastedwithquantitativesurveysconductedinCentraland
EasternEurope.Investingineducationandhumancapitalisimportantfor
creatinggoodclimateforinvestment.Evidenceshowsthatachievingacer-
tainminimumlevelofeducationisthepreconditionforacountrytoattract
andmaintainforeigndirectinvestmentandmaximiseindirecteffectscon-
nectedwithhumancapitalandresultingfromthepresenceofbusinesses
withforeigncapitalandmaximiseindirecteffectsconnectedwithhuman
capitalandresultingfromthepresenceofbusinesseswithforeigncapital.
Weshouldalsostressthatsuchaminimumisdifferentfordifferentsectors
oftheeconomy.ResultsofthestudyconductedintheLodzRegiondemon-
stratedthathumancapitalisanimportantfactor,whichattractsfditothe
region.
Key Words:humancapital,fdi,ceecountries,LodzRegion
jel Classification: f21,f23,o15
Introduction
Internationalcapitalflowshaveanincreasingimpactontheperformance
oftheworld’seconomy.Theseflowstakevariousformsandoneofthemis
foreigndirectinvestment(fdi),whoseaimistogaincontroloverabusi-
nessentitybasedinonecountrybyresidentsofanothercountry.fdiis
seenasanessentialfactorinstimulatingeconomicgrowth,expanding
ManagingGlobalTransitions13(2):151–170

152 AgnieszkaDorożyńskaandTomaszDorożyński
capital,andincreasingproductivity,employment,innovationandtech-
nologytransfer.
TheEuropeanAttractivenessSurvey2013byErnst&Young(2013)sug-
geststhattheperformanceofallcountriesofCentralandEasternEu-
ropehasbeenthebestforyears.Accordingtoinvestorsfromacrossthe
world,theattractivenessoftheregionishigherthanthatofBrazil,Rus-
siaorIndia.Globally,Chinaisstillthemostattractive.Itisfollowedby
WesternEuropeandNorthAmerica,whileCentralandEasternEurope
ranksfourth.Theceecountriesseektoattractandpromoteforeignin-
vestmenttoliberalisetheireconomiestoensurefreemovementofcapital
andprofits.Attractingforeigninvestmenthasbecomeakeycomponent
ofnationalstrategiesfortheceecountries.Evensmallregionscancom-
petestronglyforinvestmentsiftheycanprovidesufficientlyfavourable
investmentconditions.Thishascreatedapotentialtousefdiasanin-
strumenttosupportthedevelopmentofcountriesandregionsthathave
earlierlaggedbehindinincomeanddevelopment.
Withthisideainmind,weconsiderthatapossiblespecificdeterminant
offdiinflowsinCentralandEasternEuropecouldbehumancapitalin
thehostcountry.Humancapitalhasbecomeanimportantfactorfora
locationdecisionofmultinationalenterprises(mne).
Henceknowledge,initsbroadersense,isconsidereddecisiveforeco-
nomicgrowthandwearelookingfornewwaysofacquiringit.Oneofthe
channelsofknowledgetransfer,whichgainedinimportanceattheturnof
the20thand21stcenturiesisfdi.Ontheotherhand,researchshowsthat
humancapitalhelpsattractfdi.Thepaperfocusesonthesecondaspect,
thatiswhywewanttoassesstheroleofhumancapitalinattractingfdi
inthelightofselectedempiricalstudiesconductedinPolandandglob-
ally.Theliteratureonfactorsdeterminingfdilocation,includingthose
relatingtotheimportanceofhumancapital,isdominatedwithstudies
atnationalorsupranationallevel.Thepapermakesanattempttoassess
therelevanceofhumancapitalforfdiinflowatregionalandlocallev-
elsinPoland.Atthesametime,resultsofanalyseswerecontrastedwith
quantitativesurveysconductedinCentralandEasternEurope.
Thepaperconsistsoffourmainparts.Thefirstoneisanoverviewof
literatureandstudiesexploringthelinksbetweenhumancapitalandfdi.
Thesecondpartfocusesontheassessmentofinvestmentattractiveness
oftheceecountries.Furtherconsiderationsrelatetotheassessmentof
humancapitalincee.Finalpartofthepaperdiscussesselectedresults
ofquestionnaire-basedstudies,whichenabledtheassessmentoftheat-
ManagingGlobalTransitions

HumanCapitaland fdi inCentralandEasternEurope 153
Conditions:
workculture;psychological
andphysical
Educationandimpro-
vingprofessionalskills:primary
andsecondaryschools,universities;
internships,placements
trainingcourses
Humancapitalpotential:
knowledge;education;
qualificationsandskills
Economicpotential
ofacountry
figure1 ConditionsShapingthePotentialofHumanCapital
tractivenessofhumancapitalintheLodzregionasperceivedbyforeign
investors.Conclusionsfromthestudyandanalysesoflinksbetweenhu-
mancapitalandfdiprovideadeeperinsightintoregionalstudiessince
thereviewofliteraturehasshownthatusuallystudiesareconductedat
thelevelofacountry.
RelationshipbetweenHumanCapitaland fdi
Theterm‘humancapital’wascoinedbySchultz(1961)andBecker(1962).
Theydefineditasasetofcharacteristics,naturaltalents,predispositions,
attitudes,respectedvalues,acquiredabilitiesandknowledgeofpeople,
whichmaybeenrichedthroughinvestment(Niklewicz-Pijaczyńskaand
Wachowska2012,45).Sincethe1960s,thetermevolvedandhasbeen
carefullyanalysedbymanyresearchers.Thatiswhyinliteraturewemay
comeacrossmanydefinitions.
Fortheneedsofthispaper,humancapitalisdefinedasasetofknowl-
edge,education,qualificationsandskillsofagivensociety.Itiscreated
througheducationandimprovingprofessionalskills,takingaccountof
workcultureaspectsaswellaspsychologicalandphysicalconditions.
Thisishowresourcesofvaluableandusefulknowledgecanbeusedto
fostereconomicpotential(figure1).
Atinternationalscale,knowledgetransfertakesplacethroughavari-
etyofchannels,e.g.,throughtheexchangeofgoods,services,technolo-
Volume13·Number2·Summer2015

154 AgnieszkaDorożyńskaandTomaszDorożyński
giesandalsoasaresultoffdiinflow.Atmicroeconomiclevel,human
capitalimpacts,e.g.,salarieswhileatmacroeconomiclevelitinfluences
businesslocationdecisionsormaydetermineinnovationtransferaswell
asadaptationcapabilitiesoftechnologiesdevelopedinothercountries
(Golejewska2012,29–30).Prospectsofdevelopmentforeconomies,espe-
ciallytheemergingmarketsandthedevelopingworld,aredependenton
theirpotentialstomakeprofitableinvestmentsandtoaccumulatecapital.
TheBenhabibandSpeigel’s(1994,143;2005)argumentisthatthecoun-
trieswithahighlevelofhumancapitalareabletoachievehighergrowth
ratesthroughtheirabilitytoattractforeignenterprisesandassimilatenew
technologieswithefficacy.
Itisstylisedintheliteratureonforeigndirectinvestmentthatacoun-
try’sstockofhumancapitalisoneofthemostimportantdeterminantsof
itsinwardfdiflow.Manycountriesseeattractingfdiasanimportant
elementoftheireconomicdevelopmentstrategies.fdiisoneofthemain
avenuesforthemovementoftechnologyacrossnationalborders.fdi
canincreasecompetitioninthehosteconomy,makingdomesticcom-
paniesmoreefficientandstimulatessectoralandproductdiversification.
Awell-educatedworkforceisperceivedasanimportantincentiveforfor-
eigninvestmentlocationdecision(EicherandKalaitzidakis1997,22–28).
Regardingcee, Beavan and Estrin (2004) proved that foreign in-
vestors,whenmakinganinvestmentlocationdecisioninaparticular
region,considereconomicfactors,suchas:
•unitlabourcosts,
•gravityfactors,
• marketsizeandproximity.
TalpasandEnache(2010)tookupthetaskofanalysingwhetherhu-
mancapitalpositivelycorrelateswithfdiinflowsincee.Theirsurvey
showsthat‘fdiinflowsinceehavespecificpatternsandhumancapi-
taldeterminants,differentfromtheonesspecifictotherestofdevelop-
ingcountries.Forceethequalityofhumancapitalmattersinattracting
fdiinflows.Itseemsthatforeigninvestorsinthesecountriesareseeking
quickandsmoothtechnologicaltransferandhence,theyvaluethemost
thelevelandthequalityofhumancapital.’
Theabovequotedresultsconfirmthatmanyauthorsempiricallycon-
firmedsignificantroleofhumancapitalasafactor,whichattractsfdi.
However,wemustpointoutthattheroleofhumancapitalinfdiisnot
clearintheliterature.Borenszteinetal.(1998)statethatfdiispositively
ManagingGlobalTransitions

HumanCapitaland fdi inCentralandEasternEurope 155
table1 TheWorld’sMostAttractive
Regionsforfdiin2006–2014
Region   
WesternEurope   
cee   
NorthAmerica   
India   
China   
Brazil   
Russia   
notes AdaptedfromErnst&Young
,.
table2 TheMostAttractiveCountries
forfdiincee
cee  ()
Poland  –pts
CzechRepublic  –pts
Romania  +pts
Hungary  +pts
Ukraine  +pts
Turkey  +pts
Latvia  +pts
Slovakia  –pts
notes ()Changefrom.Adapted
fromErnst&Young,.
associatedwitheconomicgrowthbutitdependsonhumancapital.Coun-
trieswithalowlevelofhumancapitaldonotbenefitfromfdiinvest-
ment.Blomstrom,LipseyandZejan(1992)haven’tfoundapositiveim-
pactofeducationonfdi.Hanson(1996)findsthattheadultliteracyrate
wasnotasignificantdeterminantoffdi.Narula(1996)indicatesthatthe
numberofpeoplewithtertiaryeducationwasnotastatisticallyimpor-
tantvariableforfdiinflows.Hence,theabovementionedstudiesfrom
differentcountriesletusconcludethathumancapitalisnotnecessarily
oneofimportantfactorswhichattractforeigninvestors.
InvestmentAttractivenessofthe cee Countries
As fdi Locations
Marketpreferencesforfdiarechanging.In2014investorsparticipating
inanErnstandYoungstudyidentifiedthecountriesofWesternEurope
asthemostattractivefdilocationintheworld.Chinarankedsecond
followedbyNorthAmericancountriesandtheceecountriesrunning
fourth.
ceerankedfourth(29)slightlybelowNorthAmerica.Moreover,
thereisagrowingdivergenceintheperceivedattractivenessofEuro-
peancountries.In2014discrepanciesamongtheceecountrieswhenit
comestotheirinvestmentattractivenesswererathersubstantial(table1).
RespondentsconsideredPolandtobethemostattractivefdilocation
(31).TheCzechRepublicrankedsecond(11)whilethelastplacesin
therankingwereoccupiedbyLatvia(3)andSlovakia(2).Theover-
Volume13·Number2·Summer2015

156 AgnieszkaDorożyńskaandTomaszDorożyński
allattractivenessscoreofPolandandCzechRepublichasdeclinedby6
and4percentagepoints,respectively.Thesecountriesarelosingoutto
economiesofSouth-EastEurope(e.g.Turkey,Romania)(table2).The
foreigndirectinvestment(fdi)inflowsintotheCentralandEasternEu-
ropeaneconomieswereavitalfactorinthefirststageoftheprivatisa-
tionprocessduringthetransitionperiod.fdihasincreasedinthepast
twentyyears,tobecomethemostcommontypeofcapitalflowneeded
forthereconstruction,stabilisationoftheceeeconomiesandeconomic
growth.
Table3presentsfdiinflowsintosomeoftheceecountriesbetween
1990and2012.Thesizeandincreasingfdiinflowstoceecountriesin-
transitionwereimpressive.Poland,Hungary,andtheCzechRepublic
havebecomethemostattractivedestinationsforforeigninvestments.
Theinwardfdiinflowasapercentageofgdphasbeenthehighest
inHungary(reachingitsmaximumof51.9in2007)andintheCzech
Republic(reachingitsmaximum10.8in2002).AsPolandisthelargest
economyamongtheceecountries,fdiexpressedasapercentageof
gdpinPolandisrelativelylow.In2013Polandreportednetfdiinflow
expressedasapercentageofgdpof–1.1(table5).
Thefdiinflowmeasurestheamountoffdiincomingintoacountry
duringayear.Thefdistockisthetotalamountofproductioncapacity
ownedbyforeigninvestorsinthehostcountry.Thisindicatorhasbeen
highinHungary,theCzechRepublic,Slovakia,andconstitutesrespec-
tively81,69,60.Highshareofstockinthegdpindicatesthatfdi
arehighlyimportantfortheeconomiesoftheceecountriesandareone
oftheprincipalindicators,whichacknowledgetheinvolvementofthese
countriesinglobalisation.Itisworthadding,thattheindicatorsformost
oftheceecountriesarehigherthanglobally(table4).Theoverallin-
dicatorforEuropereachesca.50andPoland,togetherwithLatvia,are
approachingtheEuropeanaverage.
CountriesofCentralandEasternEuropeexperiencedaseriesofdeep
transformationsinthe1990s,asaresultofwhichtheyshiftedfromcen-
trallyplannedeconomytomarket-basedallocationofresources. The
transformationswere,andstillare,takingplacewithdifferentintensity
andefficiencyinindividualcountries.
Thevolumeoffdiinflowshasgrownrapidly,astheGovernments
oftheceecountrieshaveofficiallyencouragedfdianddevelopedfdi
promotionprogramsprovidingsubstantialincentivesforforeigncompa-
nies.Afterprivatisation,localauthoritiesintheceecountrieslaunched
ManagingGlobalTransitions

HumanCapitaland fdi inCentralandEasternEurope 157
table3 InwardfdiFlowsinMillionsofusaDollars,in1990–2012
Country                       
Slovenia                       
Slovakia                       
Romania                       
Poland                       
Latvia                       
Hungary                       
CzechRep.                       
table4 fdiInwardStockAsaPercentageofGrossDomesticProductintheWorld,andceeComparison,1990–2012
Country                       
World . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . .
CzechRep. . . . . . . . . . . . . . . . . . . . . . . .
Hungary . . . . . . . . . . . . . . . . . . . . . . .
Latvia . . . . . . . . . . . . . . . . . . . . . . .
Poland . . . . . . . . . . . . . . . . . . . . . . .
Romania . . . . . . . . . . . . . . . . . . . . . . .
Slovakia . . . . . . . . . . . . . . . . . . . . . . .
Slovenia . . . . . . . . . . . . . . . . . . . . . . .
Turkey . . . . . . . . . . . . . . . . . . . . . . .
Volume13·Number2·Summer2015

158 AgnieszkaDorożyńskaandTomaszDorożyński
table5 ForeignDirectInvestment,NetInflowsAsaofgdpin2000–2013
Country              
CzechRep. . . . . . . . . . . . . . .
Poland . . . . . . . . . . . . . –.
Romania . . . . . . . . . . . . . .
Hungary . . . . . . . . . –. –. –. . .
Slovakia . Nodata . . . . . . . . . . . Nodata
Slovenia . . . . . . . . . –. . . –. Nodata
Latvia . . . . . . . . . –. . . . Nodata
notes Basedoddatafromunctad(http://unctadstat.unctad.org).
table6 TheHumanCapitalIndexforSelectedceein2013
Country Overallindex Education Healthandwellness Workforceandempl. Enablingenvironment
Rank* Score Rank* Score Rank* Score Rank* Score Rank* Score
Poland  .  .  .  –.  –.
CzechRep.  .  .  .  .  .
Romania  –.  .  .  –.  –.
Hungary  .  .  –.  –.  –.
notes *Theindexcoverscountries.AdaptedfromWorldEconomicForum().
ManagingGlobalTransitions

HumanCapitaland fdi inCentralandEasternEurope 159
activitiestoimprovetheproductivity,employmentandtransferofnew
technologiestoensuresustainableeconomicgrowth.
Besides,theaccessionofthecountriesofCentralandEasternEurope
totheEuropeanUnionimprovedtheimageoftheregion,whichisnow
perceivedasopenandstableforforeigninvestors,andcontributedtobig-
gerinflowoffdi.EmpiricalliteraturesuggeststhatEuropeaneconomic
integrationhasbeenaccompaniedbyarisinglevelofforeigndirectin-
vestmentwithintheeu,andincreasedfdiflowsfromthirdcountries
(KokkoandGustavsson2004,125).
DespitethefactthatforeigninvestorsconsiderCentralandEasternEu-
ropeonearea,thecountriesintheregiondiffersignificantlywithrespect
toeconomicachievements,fdiabsorptioncapacity,andtheapproachto
investmentincentives.So,thedevelopingofalabourforce,knowledge-
ableandproperlytrainedindemandedskills,maybecomeasignificant
distinguishingelementinattractingforeigninvestors,inparticularinthe
faceofintensifyingcompetitionofthedevelopingcountries(e.g.China,
India,Brazil).
Human Capital in cee
Oneofthecharacteristicsofrichindustrialeconomiesistheavailability
ofworkforcerepresentingahighlevelofhumancapital.Becausethelevel
ofhumancapitalhasbeenacrucialfactorforfdi,itisnecessarytoeval-
uatehostceecountries’efforttodevelopitwithaviewtoattractfdi.
OnecanuseTheHumanCapitalIndexforthepurpose,whichisanew
measureforcapturingandtrackingthestateofhumancapitaldevelop-
mentaroundtheworld(table6).TheIndexincludesfourthefollowing
pillars(WorldEconomicForum2013,6–8):
•education,
• healthandwellness,
• workforceandemployment,
• enablingenvironment.
Fromthegroupoftheceecountriesweselectedthemostattractive
onesfromtheviewpointoffdiintheregion(Poland,CzechRepublic,
RomaniaandHungary).
In2013,theCzechRepublicrankedfirstinthegroupofanalysedcoun-
tries,bothfortheoverallIndex,whichmeasuresthelevelofhuman
capitaldevelopmentandforthemajorityofitspillars(i.e.Healthand
Wellness,WorkforceandEmployment,Enablingenvironment).Poland
Volume13·Number2·Summer2015

160 AgnieszkaDorożyńskaandTomaszDorożyński
table7 RankingofEducationLevelsoftheSocietyinSelectedceeCountriesin2013
Country Tertiaryeducation
attainment*
Secondaryeducation
attainment*
Primaryeducation
attainment*
() () () () () ()
C z e c h R e p .     
Hungary      
Poland      
R o m a n i a      
notes Columnheadingsareasfollows:()rank/countries,()countryvalue.
*Percentageofpopulationaged+.
rankedsecondwithits49thrank.Takingaccountoftheeducationrank-
ing,Hungaryrankedhigh(33)whilePolandmanagedtoovertakejust
Romania.Thefollowingpillarsscoredthelowest:WorkforceandEm-
ploymentandEnablingenvironmentinthreecountries:Romania,Hun-
gary,andPoland.
Consideringthelevelofeducationofpeopleintheagegroupabove25
inindividualceecountries,in2013Polandrankedthehighestintertiary
educationwhiletheCzechRepublicinsecondaryeducation(table7).
Inconclusionweneedtostressthatinordertobecomeamoreattrac-
tivelocationforaninvestmentproject,itisnecessarytoinvestineduca-
tion.Thedata,inthispart,showthatinallthecountriesfurtherinitiatives
shouldbelaunchedtosupporthumancapitaldevelopmentbyopening
upperspectivesoftertiaryeducation,whichhasbecomeincreasinglyde-
mandedbyhigh-valueaddedmultinationalenterprises.
HumanCapitalAttractivenessintheLodzRegion
intheEyesofForeignInvestors(CaseStudy)
TheassessmentofhumancapitalroleinattractingfditotheLodzRe-
gionwasbasedontheresultsofadirectstudyconductedin2011among
188companies.1Companiesincludedinthesamplerepresentedtwosec-
tors:industryandservicesandallwerepartiallyfinancedwithforeign
capital.Thesizeoftheiremploymentvariedandtheyweredividedinto
groupsinaccordancewithbindingclassificationofbusinesses.Themost
numerouswere companiesemploying 10–49and50–249people.The
populationofbigbusinesses,whichemploymorethan249people,was
twotimessmallerthanthatofsmallormedium-sizedcompanies.The
groupofmicro-companieswasthesmallest.
Thequestionconcerningthereasons,whichmadeaforeigninvestor
ManagingGlobalTransitions

HumanCapitaland fdi inCentralandEasternEurope 161
table8 ImpactofSelectedFactorsonfdiLocationDecisionintheCaseofPoland
No. Factor () () ()
. Availabilityofworkforcewithadequatequalifications . . .
. Lowsalariesandlabour-relatedcosts . . .
. Bigdomesticmarket . . .
. Littlecompetition . . .
. Goodinfrastructure . . .
. Entryintothesingleeumarket . . .
. AvailabilityofPolishsubcontractorsandsuppliers . . .
. Availabilityofforeignsubcontractorsandsuppliers . . .
. VicinityofmarketsoftheCommunityofIndep.States . . .
. Taxallowances . . .
. Highquality,stablelegalregulations . . .
notes Columnheadingsareasfollows:()averageanswer,()standarddeviation,()
variance.Rankingbasedonaverageanswers,Thepointsonthescalewereasfollows:very
big(),big(),quitebig(),neitherbignorsmall(),small(),verysmall(),none().
investinPolandwasansweredbyassessing12factorsonaseven-point
scale.Analysisofresults,besidesthedistributionofanswers,employed
averagesanddispersionmeasures.Theanalysiswasprecededbytheesti-
mationofmeasurementreliabilityusingtheCronbach’salphacoefficient.
Itsvalueinformsaboutthecorrelationbetweenanswerstoindividual
questionsandthetotalresultofthemeasurement.Itdemonstratestowhat
extenttheitems(factors)onthescalearehomogenousandrepresentthe
sameinterpretationofquestionsbyrespondents.ThevalueofCronbach’s
alphacoefficientof0.736confirmshighreliabilityofthemeasurement.
Asshownbythestudyanddataintable8,oneofthemajorreasonsfor
locatingfdientitiesinPolandistheavailabilityoftheworkforcewith
adequatequalifications.Anothervalidreasonwaslowcostoflabour.
Nextpartofthestudywasdesignedtoidentifythereasonswhyenti-
tieswithforeigncapitaldecidedtolocatetheirinvestmentsintheLodz
Region.Companiesassessedthedegreetowhichselectedfactorsencour-
agedordiscouragedthemfromdoingso.Theyrated27reasonsona
seven-pointscale.Likeinthepartofthestudyconcerningmotivations
behindinvestors’decisionstoestablishafdibusinessinPoland,weused
distributionsofanswersandstatisticalindicators:averageanswer,vari-
anceandstandarddeviation.Cronbach’salphacoefficientwas0.884in
thiscase,meaningaveryreliablemeasurement.
Foreigninvestorswerethemostencouragedtolocatetheirbusinesses
Volume13·Number2·Summer2015

162 AgnieszkaDorożyńskaandTomaszDorożyński
intheLodzRegionbyfactorsrelatingtocostsandemployment.These
were:
• relativelylowsalaries,
• lowtotalcostsofbusinessactivities,
• availabilityofworkforcewithadequatequalifications,
• availabilityofprofessionalswithadequatequalifications.
Inthefollowingstageofanalysis,reasonswhyinvestorsselectedthe
LodzRegionasthedestinationoftheirfdiwedistinguishedthemost
encouragingandthemostdiscouragingfactors.
Afterwards,wecouldrankthemostimportantfactorsinfluencingfor-
eigninvestors’locationdecisions:
• costsofproduction(services),
• salariesandwages,
• availabilityofprofessionalswithadequatequalifications,
• availabilityofworkforcewithadequatequalifications.
Whenmakinglocationdecisions,foreigninvestorsalsoassessedthe
systemofeducation,mostlysecondaryschoolsanduniversities.They
areimportantfactorsastheysupplyskilledemployees.Intheopinion
ofcompanies,availabilityofprofessionalsandworkforcewithadequate
qualificationsandappropriateprofileofschoolsarekeyfactors,whichen-
courageforeigncompaniestoinvestinaregion.Highassessmentofedu-
cationmeansinvestorsareconvincedthesystemofeducationiscapable
ofteachingskillsconsistentwiththeirpreferences.Morethanahalfand
40ofcompanies,respectively,consideredhigherandsecondaryedu-
cation‘veryimportant’and‘quiteimportant’inmakingtheirinvestment
decisions.
foreigninvestors’preferences
Oneofthefactorsdecidingaboutthelocationofaforeigninvestment
intheregionishumancapital.Thefollowinganalysisreferstoforeign
investors’preferencesfromthevoivodeshipofLodzwithrespecttore-
cruitingPolishemployeesasmanagersandatlowerpositionsandnextto
enhancetheirskillsbytraining.Mostcompanieshaveclearexpectations
vis-â-visPolesrecruitedtomanagerialpositions.Thisisconfirmedbythe
majorityofsingleselectionsinpreferencecategories.
APoleemployeeinmanagerialpositiondesiredbymostoffdicom-
paniesisapersonwiththefollowingprofile:
ManagingGlobalTransitions

HumanCapitaland fdi inCentralandEasternEurope 163
table9 PreferencesoffdiCompanieswithRespecttoRecruitingPoles
toManagerialandNon-ManagerialPositions
Levelofeducation
Vocational
Secondary
Higher
Post-graduate
Notimportant
Total






.
.
.
.
.
.






.
.
.
.
.
.
Educationprofile
Technical
Economics
Law
it
Notimportant
Other
Total







.
.
.
.
.
.
.







.
.
.
.
.
.
.
Age
–
–
–
andmore
Notimportant
Total






.
.
.
.
.
.



–


.
.
.
–
.
.
Workexperience
None
–years
Overyears
Overyears
Notimportant
Total






.
.
.
.
.
.






.
.
.
.
.
.
Commandofforeignlanguages
Verygood
Intermediate
Notimportant
Total




.
.
.
.




.
.
.
.
•highereducation,
• technicaloreconomicbackground,
• age:26–50years,
• withworkexperiencenotlongerthan10years,
• fluentinforeignlanguages.
Among164companiespreferringuniversitygraduatesonly17allowed
Volume13·Number2·Summer2015

164 AgnieszkaDorożyńskaandTomaszDorożyński
alsoforthepossibilityofapersoninmanagerialpositiontohavesec-
ondaryeducation.Theimportanceofpost-graduatestudieswasstressed
onlyby14respondents.Technicaleducationisespeciallyimportantin
theindustrialsector(over66ofanswers).Inservices,economicandit
facultiesthatweremoreoftenselected.Over15oftherespondentspre-
ferrediteducationandslightlyfewer(ca.13)didnottakeaccountof
educationprofilewhenrecruitingapersontoamanagerialposition.
56ofenterprisesarelookingforcandidatesattheageof26–50years.
Youngpeoplearepreferredbutattheageof25yearsandmore.Inter-
estinglyenough,morecompaniesarereadytorecruitapersonof26–35
years(50)thansomeoneattheageof35–50years(29)toamanagerial
position.Forover40ofrespondentstheagewasnotimportant.There
islittlechanceofemploymentforpeoplebelow25andover51yearsof
age.
Anessentialfactorforforeigninvestorsistheperiodofpreviousem-
ployment.Datashowthattheypreferredpeoplewithworkexperience
exceeding5years.fdicompaniesingeneralrequirefluentcommandof
foreignlanguagesfromthemanagerialstaff.Itisespeciallyimportantin
theservicesectorandalittlelessimportantinindustry.
Similaranalysiswasconductedforforeigninvestors’preferenceswith
respecttohiringPolishworkerstonon–managerialpositions(table9).
Respondents’answersindicatethatasuitablePolishemployeeinnon-
managerialpositionformostthefdicompaniesisapersonwiththefol-
lowingprofile:
• secondaryeducation,
• technicaloreconomic,
•attheageof26–35,
• withworkexperiencenotlongerthan5years,
• havingintermediatecommandofforeignlanguages.
Technicalbackgroundispreferredbyfdicompaniesinindustry.
Commandofforeignlanguageswasnotimportantforabout40ofcom-
panies,especiallyinindustry.Fluencyinforeignlanguageswas,however,
veryimportantintheservicesector.Ageandworkexperienceofpo-
tentialemployeeswereirrelevanttorespectively48and40offdi
companies.Otherpreferredmostlyyoungpeoplewithworkexperience
upto5yearsandagedupto35.
fdicompaniesattachgreatimportancetoprofessionaltraining,giv-
ingtheiremployeesanopportunitytoenhanceandimprovetheirskills.
ManagingGlobalTransitions

HumanCapitaland fdi inCentralandEasternEurope 165
Staffandworkers 77
Onlymanagerialstaff 7
Onlyworkers 5
Noanswer 11
figure2 EmployeesoffdiCompaniesParticipatinginTraining
table10 EmployeesoffdiCompaniesParticipatinginVocationalTraining
byBusinessSectors()
Sector () () () ()
Industrialsector . . . .
includingmanufacturing . . . .
Servicesector . . . .
includingtrade . . . .
notes Columnheadingsareasfollowing:()onlystaff,()onlyworkers,()staffand
workers,()lackofdata.
AlmosteachsurveyedcompanyorganisedtraininginPolandandalmost
halfofthemalsoabroad.
Therulewastoorganisetrainingbothformanagerialstaffaswellas
foremployeesinnon-managerialpositions.Thestructureoftrainingby
sectorsdidnotrevealbiggerdifferences.Intheservicesectortheshareof
trainingcoursesformanagerialstaffwashigherandformanagerialstaff
andworkerslowerthaninindustry.Thedifferences,however,areminor.
Subjectsoftrainingcoursesorganisedbyfdicompanieswerevery
differentiated.Mostoften,however,concernedthreeaspects:
• management and marketing, including production, quality and
companymanagement,attractingandservicingcustomers,nego-
tiations,
• financeandbanking,includingaccounting,taxes,personnel,salari-
es,audits,controlling,
• procedures,includinghealthandsafetyatwork,technical,construc-
tion,chemicalprocedures.
Twothirdsofalltrainingcourseswereconnectedwiththeseareas.
Therewerefewerprofessional,computer,foreignlanguagesandsoftskills
courses.ClearmajorityoffdianalysedintheLodzRegiondecidedthe
changeswereverypositive.Theoutputofproductionandservicesin-
creased,togetherwiththenumberofproductsplacedonthemarket,em-
ployment,productivity,andvalueofassets;distributionnetworksalsode-
Volume13·Number2·Summer2015

166 AgnieszkaDorożyńskaandTomaszDorożyński
Professional 16
Language 14
Management 32
Financeandbanking 32
Informationtechnology 13
Competences 9
Concerningprocedures 32
Other 4
figure3 SubjectsofTrainingCoursesOrganisedbyfdiCompanies
veloped.Thesmallestpositivechangeswerereportedforadvertising.In
asmallgroupofstudiedbusinessesnegativephenomenaoccurred,such
asadecreaseinproductionandemployment.
InnovationofcompanieswithforeigncapitalintheLodzRegionwas
assessedbasedontheturnoverinlicenses,implementationsofinnovative
solutionsandr&dactivities.Certificates,patentsandprotectionrights
werealsoanalysed.
The majority of foreign investors (more than 60) transferred so-
lutionsrelatingtoproducts,technologyandorganisationdevelopedin
theirparentcompaniesordaughtercompaniestofdicompanies.Im-
portantlyenough,halfofbusinessesimplementedalsotheirowninno-
vations.Everyfourthfdicompanyhasgotanr&dunitandalmost1/3
collaboratewithresearchinstitutesindevelopingandimplementingin-
novativesolutions.Byimprovingthequality,loweringcostsandbetter
matchingbetweentheofferandmarketneedssuchactivitiesimprove
competitivenessofbusinesses.Ontheotherhand,however,theirscope,
inmostcases,isquitelimited.Onlyveryfewfdicompaniessoldlicenses
andmostofthemhavenocertificates,protectionrightsorpatents,which
isindicativeoftheirlowinnovativeness.
interdependenceanalysisofthesizeofemployment
andcompanies’preferences
Inordertoanalyseinterdependencebetweenthesizeofacompanyre-
flectedinemploymentorrevenueandpreferencesvis-à-visrecruitedper-
sonsintheareaofprofessionalexperienceorforeignlanguagesweused
theindependencetestχ
2
.Thetestmaybeusedtostudythecompresence
ofvariablesscaledinorderlywayasinthecaseofthesurveyinquestion.
Inallanalysedcasesthevalueofχ
2
statisticswasmuchlowerthan
thethresholdvalues.Itmeanstherearenogroundsforrejectingthehy-
pothesisaboutstochasticindependenceofvariables.Cramer’sVwasalso
ManagingGlobalTransitions

HumanCapitaland fdi inCentralandEasternEurope 167
table11 InterdependenceAnalysisbetweentheSizeofaCompanyandPreferences
withRegardtoProfessionalExperienceandLanguagesforPersons
RecruitedtoManagerialandNon-ManagerialPositions(Calculationsfor
theIndependenceTestχ
2
)
Firstvariable Preferenceswithregardto
Professional
experience
ofpersons
recruitedto
managerial
positions
Languages
forpersons
recruitedto
managerial
positions
Professional
experience
ofpersons
recruitedto
non-manage-
rialpositions
Languages
forpersons
recruitedto
non-manage-
rialpositions
Secondvariable Employment Employment Revenue Revenue
Categoriesofthe
firstvariable
3
1
2
2
3
1
3
3
Categoriesofthe
secondvariable
4
4444
No.ofcompaniesin-
cludedinthesurvey
187 189 178 175
No.ofdegreesof
freedom
6366
χ
2
–calculated 8.0622 2.655 1.060 3.1654
χ
2
–theoretical 12.592 7.815 12.592 12.592
Significancelevel 0.05 0.05 0.05 0.05
Cramer’sV 0.1468 0.1185 0.0646 0.0951
notes
1
Requiredprofessionalexperience:a–noexperienceorlessthan5years,b
–professionalexperienceexceeding5years,c–professionalexperienceisirrelevant.
2
Requiredlanguageskills:a–verygoodb–moderate,c–irrelevant.
3
Requiredlan-
guageskills:a–veryhigh,b–moderate,c–irrelevant.
4
Categoryofoperators(basedon
theemploymentandrevenue):micro,small,mediumandbigenterprises.
verylow.Theresultsdonotsuggestanydependencebetweenthestud-
iedvariables.Itmeansthatwhenitcomestoprofessionalexperienceand
languagesforpersonsrecruitedtomanagerialandnon-managerialposi-
tions,humancapitalisanincentiveforlocatingfdiintheregion,irre-
spectiveofthesizeofabusiness.Similardependencecanbetracedfor
costsandworkforcequalifications.Micro,small,mediumandbigcom-
paniesconsiderthesefactorsinasimilarwaywhenlookingforalocation.
ConclusionandPolicyImplications
Investingineducationandhumancapitalisimportantforcreatinggood
climateforinvestment.Itisstressedthatachievingacertainminimum
Volume13·Number2·Summer2015

168 AgnieszkaDorożyńskaandTomaszDorożyński
table12 InterdependenceAnalysisoftheRemuneration,Availabilityofthe
WorkforceandtheSizeofEmployment(CalculationsfortheTestof
Independenceχ
2
)
Firstvariable Remunerationasanincentive
ordeterrentforfdilocation
intheLodzRegion
Availabilityofadequately
skilledworkforceasanin-
centiveordeterrentforfdi
locationintheLodzregion
Secondvariable Employment Employment
Categoriesofthe
firstvariable
44
Categoriesofthe
secondvariable
1
44
No.ofcompaniesin-
cludedinthesurvey
186 187
No.ofdegreesof
freedom
99
χ
2
–calculated 11.801 10.1
χ
2
–theoretical 16.919 16.919
Significancelevel 0.05 0.05
Cramer’sV 0.145 0.134
notes CategoryofOperators(BasedontheEmployment):Micro,Small,Mediumand
BigEnterprises.
levelofeducationisthepreconditionforacountrytoattractandmain-
tainforeigndirectinvestmentandmaximiseindirecteffectsconnected
withhumancapitalandresultingfromthepresenceofbusinesseswith
foreigncapital.Weshouldalsostressthatsuchaminimumisdifferent
fordifferentsectorsoftheeconomy.
Ontopofthat,careshouldbetakentoavoidthesocallededucational
gapbetweenforeigninvestorsandthehostcountryasthatmightsubstan-
tiallyreducepositiveexternalities.Accesstoskilledlabourhasbeenthe
mainmotiveforvarioustypesofresource-seekingmnes.Manycompa-
niesnowconsideraccesstoqualifiedandcreativemanpoweranimpor-
tantfactorofcompetitiveness.
Henceweshouldtakestepstosupportandimprovethequalityofhu-
manresourcesatregionalandlocallevelsby:
• improvingtheskillsofworkersthroughvocationaltrainingschemes,
languageandittechnologycourses;
• applyingeffectivemethodsofhumanresourcemanagement;
ManagingGlobalTransitions

HumanCapitaland fdi inCentralandEasternEurope 169
• developingcurriculaandcoursestomeettheneedsofforeignin-
vestors;
• changingthestructureofemploymentandskillsinthehostcountry
(topromoteareaspreferredbyforeigninvestors);
• developingschemesandinstrumentsthatcouldattracthighlyskilled
professionalsintotheregionandreducetheoutflowofgraduates
fromtheLodzRegion.
ResultsofthestudyconductedintheLodzRegiondemonstratedthat
humancapitalisanimportantfactor,whichattractsfditotheregion.
Thepresenceofforeigninvestorshascontributedtotheimprovementof
thequalityofthestaffandworkforceintheregion.Itisaconsequence
oftheimplementationofneworganisationalsolutionsandcreationof
apressureoneducationalsector.Almostallfdicompaniesorganised
trainingforemployees,someofthemmanytimesandabroad.
Humancapitalisespeciallyimportantfromthepointofviewofbene-
fitsthatmaybeachievedbytheeconomyoftheLodzRegionfromfdi.
Thisfactor,which,intheeyesofinvestors,improvesthecompetitiveness
oftheregionistheeffectoffavourablepricetoqualityrelationforhuman
capitalcombinedwithhighmarginalefficiencyofcapitalcharacteristic
foralltheCentralandEastEuropeanregion.
Notes
1 InthispaperweusedthepartialoutcomesofaresearchprojectRoleoffdi
inshapingcurrentandfutureeconomicprofileofthevoivodeshipofLodz
co-financedbytheEuropeanUnionundertheEuropeanSocialFund.
References
Beavan,A.A,andEstrinS.2004.‘TheDeterminantsofForeignInvest-
mentinto European Transition Economies.’ Journal of Comparative
Economics32(4):775–87.
Becker,G.S.1962.‘InvestmentinHumanCapital:ATheoreticalAnalysis.’
TheJournalofPoliticalEconomy70(5):9–49.
Benhabib,J.,andM.Spiegel.1994.‘TheRoleofHumanCapitalinEco-
nomicDevelopmentEvidencefromAggregateCross-CountryData.’
JournalofMonetaryEconomics34(2):143–73.
———.2005.‘HumanCapitalandTechnologyDiffusion.’InHandbook of
EconomicGrowth,editedbyP.AghionandS.Durlauf,1a:935–66.Am-
sterdam:Elsevier.
Volume13·Number2·Summer2015

170 AgnieszkaDorożyńskaandTomaszDorożyński
Blomstrom,M.,R.Lipsey,andM.Zejan.1992.‘WhatExplainsDevelop-
ingCountryGrowth.’nberWorkingPaper4132,NationalBureauof
EconomicResearch,Cambridge,ma.
BorenszteinM.,J.DeGregorio,andJ.Lee.1998.‘HowdoesForeignDirect
InvestmentAffectEconomicGrowth?’ Journal of International Eco-
nomics45:115–35.
Eicher,T.S.,andP.Kalaitzidakis.1997.‘TheHumanCapitalDimension
toForeignDirectInvestment:Training,AdverseSelectionandFirm
Location.’http://faculty.washington.edu/te/papers/infoasym.pdf
Ernst&Young.2013.‘Europe2013:CopingwiththeCrisis,theEuropean
Way.’ ey’sAttractivenessSurvey.http://www.ey.com/Publication/
vwLUAssets/European-Attractiveness-Survey-2013/$FILE/European
-Attractiveness-Survey-2013.pdf
———.2014.‘Europe2014:BackintheGame.’ey’sAttractivenessSurvey.
http://www.ey.com/Publication/vwLUAssets/EY-2014
-european-attractiveness-survey/$FILE/EY-2014-european
-attractiveness-survey.pdf
Golejewska,A.2012. Kapitał ludzki, innowacje i instytucje a konkuren-
cyjnośćregionówEuropyŚrodkowo-Wschodniej.Warsaw:CentrumEu-
ropejskieNatolin.
Hanson,G.1996.‘U.S.-MexicoIntegrationandRegionalEconomies:Evi-
dencefromBorder-CityPairs.’nberWorkingPaper542,NationalBu-
reauofEconomicResearch,Cambridge,ma.
Kokko,A.,andP.Gustavsson.2004.‘RegionalIntegration,ForeignDirect
Investment,andRegionalDevelopment’ eibPapers9(1):110–35.
Narula,R.1996. Multinational Investment and Economic Structure.Lon-
don:Routledge.
Niklewicz-Pijaczyńska,M.,andM.Wachowska.2012.Wiedza – Kapitał
ludzki–Innowacje.Wrocław:UniwersytetWrocławski.
Schultz,T.W.1961.‘InvestmentinHumanCapital.’ American Economic
Review51(1):1–17.
Talpas,I.,andC.Enache.2010.‘SearchingforHumanCapital:Determi-
nantsofForeignDirectInvestmentInflowsintheeuNewMember
States.’ Annales Universitates Apulensis Serie Oeconomica12(1):483–
94.
WorldEconomicForum.2013. TheHumanCapitalReport.Geneva:World
EconomicForum.http://www3.weforum.org/docs/WEF
_HumanCapitalReport_2013.pdf
Thispaper is published underthe termsof the Attribution-
NonCommercial-NoDerivatives 4.0 International (cc by-nc-nd 4.0)
License(http://creativecommons.org/licenses/by-nc-nd/4.0/).
ManagingGlobalTransitions