By transferring knowledge, FDI will increase the existing stock of knowledge in the host country through labour training, transfer of skills, and the transfer of new managerial and organizational practice. Foreign management skills acquired through FDI may also produce important benefits for the host countries. Beneficial spin-off effect arise when local personnel who are trained to occupy managerial, financial and technical posts in the subsidiary of a foreign MNE leave the firm and help to establish local firms. Similar benefits may arise if the superior management skills of a foreign MNE stimulate local suppliers, distributors and competitors to improve their own management skills. Workers gain new skills through explicit and implicit training. In particular, training in foreign firms may be of a higher quality given that only the most productive firms trade. Workers take these skills with them when they re-enter the domestic labour market. Training received by foreign companies sometimes may be considered under the general heading of ‘organization and management’, meaning that the host country will benefit from the ‘managerial superiority’ of MNCs. Lall and Streeten (1977) emphasize three kinds of managerial benefits:
Managerial efficiency in operations arising from better training and higher standards;
Entrepreneurial capability in seeking out investment opportunities;