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Foreign Direct Investment and Domestic Entrepreneurship: Blessing or Curse?

Author

Listed:
  • Danakol, Seçil Hülya

    () (Utrecht University)

  • Estrin, Saul

    () (London School of Economics)

  • Reynolds, Paul

    () (Aston University)

  • Weitzel, Utz

    () (Radboud University Nijmegen)

Abstract

This paper explores the effects of foreign direct investment, measured by mergers and acquisitions, on domestic entrepreneurial entry. We use a micro-panel of more than two thousand individuals disaggregated by industry in seventy countries including both developed and developing economies, 2000-2009. The theory yields ambiguous predictions about the relationship between FDI and entrepreneurship; positive spillovers via dissemination of technology or negative because of crowding out. Our empirical analysis is conducted at three levels of aggregation. We find the relationship between FDI and domestic entrepreneurship in aggregate and intra-industry to be negative. Policies need to consider how to counteract this effect.

Suggested Citation

  • Danakol, Seçil Hülya & Estrin, Saul & Reynolds, Paul & Weitzel, Utz, 2013. "Foreign Direct Investment and Domestic Entrepreneurship: Blessing or Curse?," IZA Discussion Papers 7796, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp7796
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    Cited by:

    1. Roberto Antonietti & Raffaello Bronzini & Giulio Cainelli, 2015. "Inward greenfield FDI and innovation," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 42(1), pages 93-116, March.
    2. Sara Amoroso & Bettina Mueller, 2017. "The short-run effects of Knowledge intensive greenfield FDI on new domestic entry," JRC Working Papers on Corporate R&D and Innovation 2017-02, Joint Research Centre (Seville site).
    3. Jonathan Munemo, 2015. "Foreign Direct Investment, Business Start-up Regulations, and Entrepreneurship in Africa," Economics Bulletin, AccessEcon, vol. 35(1), pages 1-13.
    4. Yılmaz Akyüz, 2015. "Foreign Direct Investment, Investment Agreements, and Economic Development: Myths and Realities," Ekonomi-tek - International Economics Journal, Turkish Economic Association, vol. 4(1), pages 1-47, January.
    5. repec:eee:quaeco:v:65:y:2017:i:c:p:97-106 is not listed on IDEAS
    6. Ozkan Eren & Masayuki Onda & Bulent Unel, 2016. "Effects of FDI on Entrepreneurial Activity: Evidence from Right-to-Work and Non-Right-to-Work States," Departmental Working Papers 2016-04, Department of Economics, Louisiana State University.

    More about this item

    Keywords

    foreign direct investment; entrepreneurship; new firm entry; spillovers;

    JEL classification:

    • 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
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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