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Foreign Direct Investment and Domestic Entrepreneurship: Blessing or Curse?

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Author Info

  • Danakol, Seçil Hülya

    ()
    (Utrecht University)

  • Estrin, Saul

    ()
    (London School of Economics)

  • Reynolds, Paul

    ()
    (Aston University)

  • Weitzel, Utz

    ()
    (Radboud University Nijmegen)

Abstract

This paper explores the effects of foreign direct investment, measured by mergers and acquisitions, on domestic entrepreneurial entry. We use a micro‐panel of more than two thousand individuals disaggregated by industry in seventy countries including both developed and developing economies, 2000‐2009. The theory yields ambiguous predictions about the relationship between FDI and entrepreneurship; positive spillovers via dissemination of technology or negative because of crowding out. Our empirical analysis is conducted at three levels of aggregation. We find the relationship between FDI and domestic entrepreneurship in aggregate and intra‐industry to be negative. Policies need to consider how to counteract this effect.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 7796.

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Length: 37 pages
Date of creation: Dec 2013
Date of revision:
Handle: RePEc:iza:izadps:dp7796

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Keywords: foreign direct investment; entrepreneurship; new firm entry; spillovers;

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