Human capital drives competitiveness and stimulates foreign investment. And people have never been more mobile. Julian Birkinshaw looks at the implications for the world’s policy makers.
Old stereotypes die hard. We are accustomed to thinking of multinational corporations as manufacturing or extraction companies; and we expect them to make substantial capital investments and create large numbers of jobs when they invest overseas. While there is still some truth to these expectations, the reality today is more nuanced, and the challenges more complex. Most multinationals are either services companies or they have a large service component to their work. Foreign investments by companies such as Ericsson, Citibank, Novartis, SAP, and Unilever are typically in support activities (such as call centres), research and development, or corporate services, rather than in manufacturing. And, today, these and other companies compete not on the basis of their manufacturing assets or even their technologies, but on the collective capabilities of their people – their human capital.
To a lesser degree, the same shift can be seen in countries. Most developed countries rely far more on their service sector than their manufacturing sector for employment. And the challenge of building and maintaining a skilled and educated workforce is high on the agenda for almost all national governments. The trouble is, human talent is increasingly becoming a global industry. Highly skilled workers have both the ability and the motivation to move to where the opportunities are greatest. Leading industry clusters, such as Silicon Valley or the City of London, are magnets for the best and the brightest around the world.
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