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Does FDI Promote Entrepreneurial Activities? A Meta-Analysis

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Abstract

Researchers have long identified both FDI and entrepreneurship as potentially important determinants of economic development. Accordingly, a literature has grown to investigate whether FDI stimulates entrepreneurial activity in host countries. It is difficult to synthesize these empirical findings because many of the studies use different definitions of FDI and entrepreneurship, study different time periods and countries, and apply different estimation procedures to generate their results. In order to better understand this literature, we collect 728 estimates from 52 studies that estimate the relationship between FDI and entrepreneurial activity using country-level data. We use meta-analysis to address two questions: (1) What is the overall, mean effect of FDI on entrepreneurship?, and (2) What factors account for differences in estimated effects across studies? An innovation of our study is that it develops a nested testing framework to select among a number of competing meta-analytic models. It also extends the new Andrews-Kasy meta-analytic estimators to allow for explanatory variables. We find that the overall, mean effect of FDI on entrepreneurial activity is close to zero and statistically insignificant. While FDI and entrepreneurial activity may each play an important role in economic development, our results indicate that FDI does not generally stimulate entrepreneurship. This suggests that public policy efforts to encourage entrepreneurship through FDI are unlikely to be successful. All the files necessary to reproduce the results in this paper are available online at Harvard Dataverse.

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  • Sanghyun Hong & W. Robert Reed & Bifei Tian & Tingting Wu & Gen Chen, 2020. "Does FDI Promote Entrepreneurial Activities? A Meta-Analysis," Working Papers in Economics 20/20, University of Canterbury, Department of Economics and Finance.
  • Handle: RePEc:cbt:econwp:20/20
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    More about this item

    Keywords

    Meta-analysis; FDI; Entrepreneurship;

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General

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