Injecting Demand Through Spillovers: Foreign Direct Investment, Domestic Socio-Political Conditions, and Host-Country Entrepreneurial Activity

22 Pages Posted: 25 Jul 2013 Last revised: 31 Jan 2014

See all articles by Phillip H. Kim

Phillip H. Kim

Babson College - Arthur M. Blank Center for Entrepreneurship

Mingxiang Li

University of Wisconsin - Madison - Department of Management and Human Resources

Date Written: December 28, 2012

Abstract

This study examines how foreign direct investment (FDI) spurs entrepreneurial activity in host countries. We also investigate why this relationship varies across countries because of domestic socio-political conditions. The findings from our panel analyses of 104 countries from 2000 to 2009 are consistent with our predictions that foreign direct investment positively relates to business creation and this positive effect is strongest in countries with poor institutional support, weak political stability, and low general human capital. Our work provides new insights into how cross-border investments and domestic socio-political conditions jointly influence entrepreneurial activity, especially in emerging and developing economies.

Keywords: Foreign direct investment, New firm creation, Institutional support, Political stability, General human capital

JEL Classification: L26, F23, M13, O17

Suggested Citation

Kim, Phillip H. and Li, Mingxiang, Injecting Demand Through Spillovers: Foreign Direct Investment, Domestic Socio-Political Conditions, and Host-Country Entrepreneurial Activity (December 28, 2012). 2014. Journal of Business Venturing. (29) 210-231, Available at SSRN: https://ssrn.com/abstract=2297423

Phillip H. Kim (Contact Author)

Babson College - Arthur M. Blank Center for Entrepreneurship ( email )

231 Forest Street
Babson Park, MA 02457-0310
United States

Mingxiang Li

University of Wisconsin - Madison - Department of Management and Human Resources ( email )

Madison, WI
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
71
Abstract Views
1,031
rank
386,870
PlumX Metrics