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Inward Foreign Direct Investment and Domestic Entrepreneurship: A Regional Analysis of New Firm Creation in Korea

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  • In Hyeock Lee
  • Eunsuk Hong
  • Laixiang Sun

Abstract

Lee I. H., Hong E. and Sun L. Inward foreign direct investment and domestic entrepreneurship: a regional analysis of new firm creation in Korea, Regional Studies . This paper assesses the intra- and inter-regional impacts of inward foreign direct investment on the decisions of establishing new firms in a given location by prospective local entrepreneurs, an important topic which has been largely neglected in the literature. Using a large firm-level dataset of 44 434 newly created small firms in 234 regions of South Korea in 2000-2004, the econometric estimations indicate that both intra- and inter-regional foreign direct investment spillovers influence entrepreneurs' decisions to situate new firms in a specific region, with inverted 'U'-shaped curvilinear effects. The findings also suggest that the effect of regional foreign direct investment spillover on new firm creation is largely a localized phenomenon.

Suggested Citation

  • In Hyeock Lee & Eunsuk Hong & Laixiang Sun, 2014. "Inward Foreign Direct Investment and Domestic Entrepreneurship: A Regional Analysis of New Firm Creation in Korea," Regional Studies, Taylor & Francis Journals, vol. 48(5), pages 910-922, May.
    • Handle: RePEc:taf:regstd:v:48:y:2014:i:5:p:910-922
    DOI: 10.1080/00343404.2012.690067
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    Cited by:

    1. Hong, Sanghyun & Robert Reed, W. & Tian, Bifei & Wu, Tingting & Chen, Gen, 2021. "Does FDI promote entrepreneurial activities? A meta-analysis," World Development, Elsevier, vol. 142(C).
    2. Elaine Laing & André Stel & David J. Storey, 2022. "Formal and informal entrepreneurship: a cross-country policy perspective," Small Business Economics, Springer, vol. 59(3), pages 807-826, October.
    3. Bettin, Giulia & Massidda, Carla & Piras, Romano, 2024. "The intertwined role of social and financial remittances in new firms' creation," Journal of International Management, Elsevier, vol. 30(1).
    4. Marzieh Abolhassani & Seçil Hülya Danakol, 2019. "Wage and competition channels of foreign direct investment and new firm entry," Small Business Economics, Springer, vol. 53(4), pages 935-960, December.
    5. Lee, In Hyeock (Ian) & Hong, Eunsuk & Makino, Shige, 2020. "The effect of non-conventional outbound foreign direct investment (FDI) on the domestic employment of multinational enterprises (MNEs)," International Business Review, Elsevier, vol. 29(3).
    6. Sara Amoroso & Bettina Müller, 2018. "The short-run effects of knowledge intensive greenfield FDI on new domestic entry," The Journal of Technology Transfer, Springer, vol. 43(3), pages 815-836, June.
    7. Piers Thompson & Wenyu Zang, 2018. "The foreign business and domestic enterprise relationship: Its implications for local entrepreneurial resilience," Local Economy, London South Bank University, vol. 33(1), pages 10-39, February.
    8. Yung Hyeock Lee & In Hyeock (Ian) Lee, 2022. "A regional analysis of crime heterogeneity and small- and medium-sized enterprise (SME) location choices: recent evidence from South Korea," Asian Business & Management, Palgrave Macmillan, vol. 21(4), pages 569-597, September.
    9. Andrew Crawley & Max Munday & Rick Delbridge, 2020. "Selling The Region: The Problems of a Multi‐Agency Approach in Promoting Regional Economies," Regional Science Policy & Practice, Wiley Blackwell, vol. 12(3), pages 397-412, June.
    10. Laixiang Sun & In Hyeock Lee & Eunsuk Hong, 2017. "Does foreign direct investment stimulate new firm creation? In search of spillovers through industrial and geographical linkages," Small Business Economics, Springer, vol. 48(3), pages 613-631, March.

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