The Impact of Foreign Direct Investment on New Firm Survival in the UK: Evidence for Static v. Dynamic Industries

University of Nottingham Research Paper No. 2007/09

32 Pages Posted: 13 Feb 2007  

Andrew E. Burke

Cranfield University - School of Management

Holger Görg

University of Kiel; Kiel Institute for the World Economy

Aoife Hanley

Nottingham University Business School (NUBS) - Industrial Economics Division

Date Written: February 2007

Abstract

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.

Keywords: new firms, foreign direct investment, dynamic industries

JEL Classification: F20, L11, L25, M13

Suggested Citation

Burke, Andrew E. and Görg, Holger and Hanley, Aoife, The Impact of Foreign Direct Investment on New Firm Survival in the UK: Evidence for Static v. Dynamic Industries (February 2007). Available at SSRN: https://ssrn.com/abstract=962848 or http://dx.doi.org/10.2139/ssrn.962848

Andrew E. Burke (Contact Author)

Cranfield University - School of Management ( email )

Bedfordshire, MK43 0AL
United Kingdom

HOME PAGE: http://www.som.cranfield.ac.uk/som/faculty/Showfaculty.asp?link=420

Holger Gorg

University of Kiel ( email )

Olshausenstr. 40
D-24118 Kiel, Schleswig-Holstein 24118
Germany

Kiel Institute for the World Economy ( email )

P.O. Box 4309
Kiel, D-24100
Germany

Aoife Hanley

Nottingham University Business School (NUBS) - Industrial Economics Division ( email )

Jubilee Campus
Wollaton Road
Nottingham, NG8 1BB
United Kingdom

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