Advanced Search
MyIDEAS: Login to save this paper or follow this series

Does foreign direct investment crowd out domestic entrepreneurship?

Contents:

Author Info

  • Koen de Backer
Registered author(s):

    Abstract

    In analyzing firm entry and exit across Belgian manufacturing industries, this paper presents evidence that import competition and foreign direct investment discourage entry and stimulate exit of domestic entrepreneurs. These results are in line with theoretical occupational choice models that predict foreign direct investment would crowd out domestic entrepreneurs through their selections in product and labor markets. However, the empirical results also suggest that this crowding out effect may be moderated or even reversed in the long-run due to the long term positive effects of FDI on domestic entrpreneurship as a result of learning, demonstration, networking and linkage effects between foreign and domestic firms.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.econ.upf.edu/docs/papers/downloads/618.pdf
    File Function: Whole Paper
    Download Restriction: no

    Bibliographic Info

    Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 618.

    as in new window
    Length:
    Date of creation: May 2002
    Date of revision:
    Handle: RePEc:upf:upfgen:618

    Contact details of provider:
    Web page: http://www.econ.upf.edu/

    Related research

    Keywords: FDI; entrepreneurship; entry/exit;

    Find related papers by JEL classification:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Gorg, Holger & Strobl, Eric, 2002. "Multinational companies and indigenous development: An empirical analysis," European Economic Review, Elsevier, Elsevier, vol. 46(7), pages 1305-1322, July.
    2. Krugman, Paul & Venables, Anthony J., 1990. "Integration and the Competitiveness of Peripheral Industry," CEPR Discussion Papers, C.E.P.R. Discussion Papers 363, C.E.P.R. Discussion Papers.
    3. Kihlstrom, Richard E & Laffont, Jean-Jacques, 1979. "A General Equilibrium Entrepreneurial Theory of Firm Formation Based on Risk Aversion," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 87(4), pages 719-48, August.
    4. Geroski, P. A., 1995. "What do we know about entry?," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 13(4), pages 421-440, December.
    5. Blomstrom, Magnus & Kokko, Ari, 1998. " Multinational Corporations and Spillovers," Journal of Economic Surveys, Wiley Blackwell, Wiley Blackwell, vol. 12(3), pages 247-77, July.
    6. JosÈ Mata & Pedro Portugal, 2004. "Patterns of Entry, Post-Entry Growth and Survival: A Comparison Between Domestic and Foreign Owned Firms," Small Business Economics, Springer, Springer, vol. 22(3_4), pages 283-298, 04.
    7. McDonald, John F & Moffitt, Robert A, 1980. "The Uses of Tobit Analysis," The Review of Economics and Statistics, MIT Press, vol. 62(2), pages 318-21, May.
    8. Morck, Randall & Yeung, Bernard, 1991. "Why Investors Value Multinationality," The Journal of Business, University of Chicago Press, University of Chicago Press, vol. 64(2), pages 165-87, April.
    9. Gene M. Grossman, 1983. "International Trade, Foreign Investment, and the Formation of the Entrepreneurial Class," NBER Working Papers 1174, National Bureau of Economic Research, Inc.
    10. Dunning, John H & Rugman, Alan M, 1985. "The Influence of Hymer's Dissertation on the Theory of Foreign Direct Investment," American Economic Review, American Economic Association, American Economic Association, vol. 75(2), pages 228-32, May.
    11. Baldwin, John R. & Gorecki, Paul K., 1987. "Plant creation versus plant acquisition : The entry process in canadian manufacturing," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 5(1), pages 27-41, March.
    12. S. Lael Brainard, 1993. "An Empirical Assessment of the Factor Proportions Explanation of Multi-National Sales," NBER Working Papers 4583, National Bureau of Economic Research, Inc.
    13. Markusen, James R. & Venables, Anthony J., 1999. "Foreign direct investment as a catalyst for industrial development," European Economic Review, Elsevier, Elsevier, vol. 43(2), pages 335-356, February.
    14. Carree, Martin & Thurik, Roy, 1994. " The Dynamics of Entry, Exit and Profitability: An Error Correction Approach for the Retail Industry," Small Business Economics, Springer, Springer, vol. 6(2), pages 107-16, April.
    15. Richard Baldwin, 1988. "Factor Market Barriers are Trade Barriers: Gains From Trade in 1992," NBER Working Papers 2656, National Bureau of Economic Research, Inc.
    16. James R. Markusen, 1998. "Multinational Firms, Location and Trade," The World Economy, Wiley Blackwell, vol. 21(6), pages 733-756, 08.
    17. Dixit, A., 1988. "Entry And Exit Decisions Under Uncertainty," Papers, Princeton, Department of Economics - Financial Research Center 91, Princeton, Department of Economics - Financial Research Center.
    18. Gorecki, Paul K, 1976. "The Determinants of Entry by Domestic and Foreign Enterprises in Canadian Manufacturing Industries: Some Comments and Empirical Results," The Review of Economics and Statistics, MIT Press, vol. 58(4), pages 485-88, November.
    19. Steven Globerman, 1979. "Foreign Direct Investment and `Spillover' Efficiency Benefits in Canadian Manufacturing Industries," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 12(1), pages 42-56, February.
    20. Dunne, T. & Roberts, M.J. & Samuelson, L., 1988. "Pattenrs Of Firm Entry And Exit In U.S. Manufacturing Industries," Papers, Pennsylvania State - Department of Economics 1-88-2, Pennsylvania State - Department of Economics.
    21. Schultz, Theodore W, 1980. " Investment in Entrepreneurial Ability," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 82(4), pages 437-48.
    22. Gorg, Holger & Strobl, Eric, 2001. "Multinational Companies and Productivity Spillovers: A Meta-analysis," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 111(475), pages F723-39, November.
    23. Massimo Motta & George Norman, 1993. "Does economic integration cause foreign direct investment?," Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra 28, Department of Economics and Business, Universitat Pompeu Fabra.
    24. Oi, Walter Y, 1983. "Heterogeneous Firms and the Organization of Production," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 21(2), pages 147-71, April.
    25. Rodriguez-Clare, Andres, 1996. "Multinationals, Linkages, and Economic Development," American Economic Review, American Economic Association, American Economic Association, vol. 86(4), pages 852-73, September.
    26. Geroski, P. A. & Masson, R. T., 1987. "Dynamic market models in industrial organization," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 5(1), pages 1-13, March.
    27. repec:fth:michin:282 is not listed on IDEAS
    28. Johnson, Peter & Parker, Simon, 1994. " The Interrelationships between Births and Deaths," Small Business Economics, Springer, Springer, vol. 6(4), pages 283-90, August.
    29. Shapiro, Daniel & Khemani, R. S., 1987. "The determinants of entry and exit reconsidered," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 5(1), pages 15-26, March.
    30. James Tobin, 1956. "Estimation of Relationships for Limited Dependent Variables," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 3R, Cowles Foundation for Research in Economics, Yale University.
    31. Evans, David S & Leighton, Linda S, 1989. "Some Empirical Aspects of Entrepreneurship," American Economic Review, American Economic Association, American Economic Association, vol. 79(3), pages 519-35, June.
    32. Leo Sleuwaegen & Koen Backer, 2001. "Multinational firms, market integration, and trade structure: What remains of the standard-goods hypothesis?," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 137(3), pages 379-403, September.
    33. Mata, Jose, 1993. "Entry and type of entrant : Evidence from Portugal," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 11(1), pages 101-122, March.
    34. Kanbur, S M, 1979. "Of Risk Taking and the Personal Distribution of Income," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 87(4), pages 769-97, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. Yang, Boqiong & Chen, Jianguo, 2011. "An empirical model of the environmental effect of FDI in host countries: Analysis based on Chinese panel data," IAMO Forum 2011: Will the "BRICs Decade" Continue? – Prospects for Trade and Growth 3, Leib­niz Institute of Agricultural Development in Central and Eastern Europe (IAMO).
    2. Alaya MAROUANE (Université of Tunis) & Dalila NICET-CHENAF (GREThA UMR CNRS 5113) & Eric ROUGIER (GREThA UMR CNRS 5113), 2008. "The law of growth and attraction: an endogenous model of absorptive capacities, FDI and income for MENA countries," Cahiers du GREThA, Groupe de Recherche en Economie Théorique et Appliquée 2008-27, Groupe de Recherche en Economie Théorique et Appliquée.
    3. Elisa Galeotti, 2009. "Do Domestic Firms Benefit from Geographical Proximity with Foreign Investors? Evidence from the Privatization of the Czech Glass Industry," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 3(1), pages 026-047, March.
    4. Dalila NICET-CHENAF (GREThA UMR CNRS 5113) & Eric ROUGIER (GREThA UMR CNRS 5113), 2009. "FDI and growth: A new look at a still puzzling issue," Cahiers du GREThA, Groupe de Recherche en Economie Théorique et Appliquée 2009-13, Groupe de Recherche en Economie Théorique et Appliquée.

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:upf:upfgen:618. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.