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Injecting demand through spillovers: Foreign direct investment, domestic socio-political conditions, and host-country entrepreneurial activity

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  • Kim, Phillip H.
  • Li, Mingxiang

Abstract

This study examines how foreign direct investment (FDI) spurs entrepreneurial activity in host countries. We also investigate why this relationship varies across countries because of domestic socio-political conditions. The findings from our panel analyses of 104 countries from 2000 to 2009 are consistent with our predictions that foreign direct investment positively relates to business creation and this positive effect is strongest in countries with poor institutional support, weak political stability, and low general human capital. Our work provides new insights into how cross-border investments and domestic socio-political conditions jointly influence entrepreneurial activity, especially in emerging and developing economies.

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  • Kim, Phillip H. & Li, Mingxiang, 2014. "Injecting demand through spillovers: Foreign direct investment, domestic socio-political conditions, and host-country entrepreneurial activity," Journal of Business Venturing, Elsevier, vol. 29(2), pages 210-231.
    • Handle: RePEc:eee:jbvent:v:29:y:2014:i:2:p:210-231
    DOI: 10.1016/j.jbusvent.2012.10.004
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    More about this item

    Keywords

    Foreign direct investment; New firm creation; Institutional support; Political stability; General human capital;
    All these keywords.

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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