Industry-academe linkages in the Philippines: Embedding foreign investors, capturing institutions?

The global sourcing of services from developing countries has made human capital a key local asset for attracting foreign direct investment. This paper analyses to what extent individual companies engage in linkages and collaborations with universities and how the education sector responds to the new demands of the knowledge economy. Offshore services are generally recognised as 'footloose' investments with limited local linkages. A case study of industry-academe linkages in the growing business process outsourcing sector in the Philippines finds that foreign investors engage in active embedding and develop linkages with human resource providers, leading to increased territorial embeddedness. This paper investigates the kind of linkages created, which actors engage in them and their motivations, to understand the resulting implications for local economic development. Interviews with foreign investors and higher education institutions reveal that most collaboration is initiated by large call centre companies and focuses on entry-level skills development for their operations. I argue that multinational corporations have been able to capture local institutions and introduce changes in the education system to supply mainly lower-end skills. While increasing the available talent pool and raising the competitiveness for further investments, this presents challenges for upgrading into higher value-added services and potentially transforms the country into a dependent market economy.