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Domestic Capital Vs. Foreign Capital New Enterprise Creation: The Case Of Fdi In India

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  • TULASIDHARAN SAJIKUMAR

    (Entrepreneurship Development Institute of India, Ahmedabad, India)

  • AMÂNDIO F. C. DA SILVA

    (ISCA, University of Aveiro, GOVCOPP, Portugal, and FCHS, University Fernando Pessoa, Portugal)

Abstract

The attempt of this paper is to find an empirical relationship between Foreign Direct Investmentand New Firms (Paid up Capital) and Gross Capital Formation (proxy for business growth) andCredit to Commercial Sector and Gross Capital Formation using the test of stationarity (ADF, PP,and KPSS methods), Johansen Cointegration and Granger’s Causality. The results show that FDIcrowds out creation of new firms and capital formation and it is the Credit flow to the commercial sector that causes Gross Capital Formation at current price. It shows domestic flow of creditis more influential in capital formation rather than foreign capital inflow.

Suggested Citation

Handle: RePEc:wsz:fiq000:v:19:y:2023:i:4:id:453
DOI: 10.2478/fiqf-2023-0024
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