Working Paper: CEPR ID: DP9793
Authors: Seil Hlya Danakol; Saul Estrin; Paul Reynolds; Utz Weitzel
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 Codes: F23; L26; M13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| FDI inflows (F21) | nascent entrepreneurship (L26) |
| FDI inflows (F21) | new business ownership (M13) |
| FDI inflows (F21) | total early-stage entrepreneurial activity (L26) |
| GDP per capita (O49) | FDI inflows (F21) |
| FDI inflows (F21) | local entrepreneurs (M13) |