Inbound foreign direct investment and domestic entrepreneurial activity

There is an interesting and lively debate going on in the academic literature intersecting trade policy and entrepreneurship. Several studies have shown that inbound foreign direct investment (FDI) has a negative effect on rates of entrepreneurship, while others find the opposite - a higher rate of...

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Bibliographic Details
Published in:Entrepreneurship and regional development 2015-05, Vol.27 (5-6), p.334-356
Main Authors: Pathak, Saurav, Laplume, André, Xavier-Oliveira, Emanuel
Format: Article
Language:English
Subjects:
crowding effect
Entrepreneurs
Entrepreneurship
Foreign investment
inbound FDI
International comparisons
knowledge spillovers
Limited liability companies
Studies
trade
Trade policy
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Summary:There is an interesting and lively debate going on in the academic literature intersecting trade policy and entrepreneurship. Several studies have shown that inbound foreign direct investment (FDI) has a negative effect on rates of entrepreneurship, while others find the opposite - a higher rate of new firm creation associated with increased inbound FDI. We study the phenomenon using a cross-country analysis of data on entrepreneurs from 38 countries and from 2001 to − 2008. Results indicate that inbound FDI has negative associations with five types of entrepreneurship (nascent, new, early-stage, established, and high-growth) measured by the Global Entrepreneurship Monitor survey. In our discussion, we argue that our study supports the contention that studies counting new limited liability company registrations do not always measure the same thing as entrepreneurial entries (self-reports), leading to different, even opposite results when subjected to empirical analysis.
ISSN:0898-5626
1464-5114
DOI:10.1080/08985626.2015.1058424