Learning from Abroad? “Reverse Diffusion” and the Domestic Employment Practices of American Multinationals

Abstract

It is well established that the American economy is the main source of foreign direct investment (FDI). The stock of outward FDI from the United States was worth over $2 trillion at the end of 2004, more than a fifth of the total.1 Most of the debate on the consequences of this has been on the issue of job loss in the States, with much recent attention focusing on the displacement of workers due to “offshoring” of services.2 A quite different impact, which has received much less attention, is the potential that outward investment creates for U.S.-based multinational companies (MNCs) to observe novel employment practices in other countries and transfer these back to their domestic sites.