The Impact of Foreign Direct Investment on New Firm Survival in the UK: Evidence for Static v. Dynamic Industries
Andrew E. Burke
Cranfield University - School of Management
Kiel Institute for the World Economy; Institute for the Study of Labor (IZA)
Nottingham University Business School (NUBS) - Industrial Economics Division
University of Nottingham Research Paper No. 2007/09
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.
Number of Pages in PDF File: 32
Keywords: new firms, foreign direct investment, dynamic industries
JEL Classification: F20, L11, L25, M13
Date posted: February 13, 2007
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