Foreign Entrants and Domestic Entrepreneurship: Evidence from Vietnam

Abstract

This paper examines the impacts of foreign entrants and international trade on potential entrants in Vietnam. Based on a discrete entry model, estimates show that foreign direct investment (FDI) stimulates more domestic entrants in the short run, while the aggregate effect of FDI varies across FDI types. Horizontal FDI tends to have no impact on local start‐ups while vertical FDI is found to have a positive impact on the inflow of domestic entry for only the backward linkage and not for the forward linkage. Moreover, industries with more exports accommodate more domestic entrants, whereas imports tend to deter domestic start‐ups.

Keywords: FDI, start‐up, entry, export, Vietnam