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The Impact of Foreign Direct Investment On New Firm Survival in the UK: Evidence For Static v. Dynamic Industries

  • Andrew Burke,
  • Holger Görg,
  • Aoife Hanley

The paper examines the impact of Foreign Direct Investment (FDI) on the survival of business start-ups. FDI has potential for both negative displacement/competition effects as well as positive knowledge spillover and linkage effects on new ventures. We find a net positive effect for the whole dataset. However, a major contribution of the paper is to outline and test an argument that this effect is likely to be comprised of a net negative effect in dynamic industries (high churn: firm entry plus exit relative to the stock of firms) alongside a net positive effect in static (low churn) industries. We find evidence to support this view. The results identify new effects of globalisation on enterprise development with associated challenges for industrial policy.

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File URL: http://www.nottingham.ac.uk/gep/documents/papers/2007/07-09.pdf
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Paper provided by University of Nottingham, GEP in its series Discussion Papers with number 07/09.

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Handle: RePEc:not:notgep:07/09
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  1. Holger G–rg & Eric Strobl, 2003. "Multinational Companies, Technology Spillovers and Plant Survival," Scandinavian Journal of Economics, Wiley Blackwell, vol. 105(4), pages 581-595, December.
  2. Agarwal, Rajshree & Bayus, Barry L., 2002. "The Market Evolution and Sales Take-Off of Product Innovations," Working Papers 02-0104, University of Illinois at Urbana-Champaign, College of Business.
  3. Eduardo Borensztein & Jose De Gregorio & Jong-Wha Lee, 1995. "How Does Foreign Direct Investment Affect Economic Growth?," NBER Working Papers 5057, National Bureau of Economic Research, Inc.
  4. Girma, Sourafel & Gorg, Holger, 2007. "Evaluating the foreign ownership wage premium using a difference-in-differences matching approach," Journal of International Economics, Elsevier, vol. 72(1), pages 97-112, May.
  5. Audretsch, David B., 1995. "Innovation, growth and survival," International Journal of Industrial Organization, Elsevier, vol. 13(4), pages 441-457, December.
  6. Georgios Fotopoulos & Nigel Spence, 1998. "Entry and exit from manufacturing industries: symmetry, turbulence and simultaneity - some empirical evidence from Greek manufacturing industries, 1982-1988," Applied Economics, Taylor & Francis Journals, vol. 30(2), pages 245-262, February.
  7. Johnson, Peter & Parker, Simon, 1994. "The Interrelationships between Births and Deaths," Small Business Economics, Springer, vol. 6(4), pages 283-90, August.
  8. Ann E. Harrison & Brian J. Aitken, 1999. "Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela," American Economic Review, American Economic Association, vol. 89(3), pages 605-618, June.
  9. Burke, Andrew E. & To, Ted, 2001. "Can reduced entry barriers worsen market performance? A model of employee entry," International Journal of Industrial Organization, Elsevier, vol. 19(5), pages 695-704, April.
  10. Burke, Andrew E & FitzRoy, Felix R & Nolan, Michael A, 2000. " When Less Is More: Distinguishing between Entrepreneurial Choice and Performance," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 62(5), pages 565-87, December.
  11. Mata, Jose & Portugal, Pedro, 1994. "Life Duration of New Firms," Journal of Industrial Economics, Wiley Blackwell, vol. 42(3), pages 227-45, September.
  12. Rajshree Agarwal & Barry L. Bayus, 2002. "The Market Evolution and Sales Takeoff of Product Innovations," Management Science, INFORMS, vol. 48(8), pages 1024-1041, August.
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