REGIONAL COOPERATION AND ECONOMIC INTEGRATION

PART IV:
medium-sized enterprises, and regional development. Balkan transition economies in
their efforts to adopt the European standards, enhance competitiveness, and become more
attractive for foreign direct investments have encountered a lot of problems and challenges.
Human resource development represents one of the most important one.
1.
The role of human capital in a knowledge-based economy
In a knowledge society, competitiveness is to have the knowledge advantage. If a company
wants to grow and develop, it has to answer on the challenges of the global market, faster
and better comparing to its competitors. One of the key conditions for achievement of
this goal is the existence of high competent employees. Human capital is actually on of
the most important source of companies` competitiveness and it also influences economic
development of a country and facilitate FDI.
Here, it will be shortly discussed a few theories which are focused on the importance
of human capital in facilitating FDI, explaining country’s development and international
competitiveness. They are: Monopolistic advantage theory, Internalization theory,
International technology gap theory and Porter’s competitive diamond. Proponents of
Monopolistic advantage theory argued that investor firms typically possess monopolistic
advantages that enable them to succeed over indigenous firms in their operations abroad.
These monopolistic advantages stem from superior knowledge and/or oligopoly. Superior
knowledge pertains to the investor company’s intangible assets, such as ‘technology,
management and organization skills, marketing skills, and the like (Root, 2001, pp. 376).
These intangible assets reside within the human talent in the firm. Thus, in order to gain a
competitive advantage firms seek to acquire and retain such human talent. Internalization
theory, also known as transaction-cost theory, asserts that firms seek to lower transaction
costs by replacing external markets with internal flows (Casson, 1987; Root, 2001). In
the context of new knowledge generation, ‘the most direct way to prevent disclosure and
thereby earn monopoly rent is for the firm to internalize its knowledge. Instead of selling
its knowledge to outsiders, the firm applies that knowledge only to production under its
control (Root, 2001, pp. 378). The creation and transfer of new knowledge are made
possible by and through human talent in the organization. Thus, in order to attain and
maintain a firm’s competitive advantage and excel abroad, it is imperative that the company
succeeds in attracting and retaining human talent. Internalization theory is also known as
the product life-cycle theory of international trade (IPLC) (Vernon, 1966). It explains how
imitator countries close the technology gap by acquiring and learning the technology of
the innovator country, so much so that over time, the innovator country becomes the net
importer of the product that they developed. In order to close the technological gap, the
imitator country has to possess the human power that can acquire and absorb the advanced
technology. Porter’s competitive diamond seeks to account for a country’s international
competitiveness through an analysis of its factor conditions; demand conditions; related
and supporting industries; firm strategy, structure and rivalry; government; and chance
(Porter, 1990). The “factor conditions” refer to a country’s factors of production, labour (or
more specifically, human capital) being one of them. By analyzing these four theories we
can realize the all of them point to the pivotal role that highly trained and developed human
resources – human capital or talent can play in affecting a country’s ability to expand
abroad through FDI and/or gain international competitiveness.
One of the most important studies in the field of human capital in the European Union is
the study which was conducted by the Lisbon Council from the Brussels and Accenture
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