Foreign Direct Investment and Domestic Entrepreneurship: Blessing or Curse?

41 Pages Posted: 2 Jun 2014

See all articles by Seçil Danakol

Seçil Danakol

Utrecht University

Saul Estrin

London School of Economics & Political Science (LSE); Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Paul D. Reynolds

George Washington U; Center for Entrepreneurial Excellence

Utz Weitzel

VU University Amsterdam

Multiple version iconThere are 2 versions of this paper

Date Written: January 2014

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.

Keywords: entrepreneurship, foreign direct investment, new firm entry, spillovers

JEL Classification: F23, L26, M13

Suggested Citation

Danakol, Seçil and Estrin, Saul and Estrin, Saul and Reynolds, Paul Davidson and Weitzel, Utz, Foreign Direct Investment and Domestic Entrepreneurship: Blessing or Curse? (January 2014). Available at SSRN: https://ssrn.com/abstract=2444791

Seçil Danakol (Contact Author)

Utrecht University ( email )

No Address Available

Saul Estrin

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Paul Davidson Reynolds

George Washington U; Center for Entrepreneurial Excellence ( email )

United States
01-305-781-8812 (Phone)

Utz Weitzel

VU University Amsterdam ( email )

De Boelelaan 1105
Amsterdam
Netherlands

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