Foreign direct investment via M&A and domestic entrepreneurship:  blessing or curse?

Seçil Hülya Danakol; Saul Estrin; Paul Reynolds; Utz Weitzel

doi:10.1007/s11187-016-9792-z

Foreign direct investment via M&A and domestic entrepreneurship: blessing or curse?

Seçil Hülya Danakol^*, Saul Estrin, Paul Reynolds, Utz Weitzel

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

Abstract

There are conflicting predictions in the literature about the relationship between FDI and entrepreneurship. This paper explores how foreign direct investment (FDI) inflows, measured by lagged cross-border mergers and acquisitions (M&A), affect entrepreneurial entry in the host economy. We have constructed a micro-panel of more than two thousand individuals in each of seventy countries, 2000–2009, linked to FDI by matching sectors. We find the relationship between FDI inflows and domestic entrepreneurship to be negative across all economies. This negative effect is much more pronounced in developed than developing economies and is also identified within industries, notably in manufacturing. Policies to encourage FDI via M&A need to consider how to counteract the prevailing adverse effect on domestic entrepreneurship.

Original language	English
Pages (from-to)	599–612
Number of pages	14
Journal	Small Business Economics
Volume	48
Issue number	3
Early online date	30 Aug 2016
DOIs	https://doi.org/10.1007/s11187-016-9792-z
Publication status	Published - Mar 2017

Bibliographical note

The final publication is available at Springer via http://dx.doi.org/10.1007/s11187-016-9792-z

Supplementary data available on the journal website.

Keywords

entrepreneurship
foreign direct investment
new firm entry
spillovers

Access to Document

10.1007/s11187-016-9792-z

Foreign direct investment via M&A and domestic entrepreneurship
The final publication is available at Springer via http://dx.doi.org/10.1007/s11187-016-9792-z
Accepted author manuscript, 641 KB

Cite this

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title = "Foreign direct investment via M&A and domestic entrepreneurship: blessing or curse?",

abstract = "There are conflicting predictions in the literature about the relationship between FDI and entrepreneurship. This paper explores how foreign direct investment (FDI) inflows, measured by lagged cross-border mergers and acquisitions (M&A), affect entrepreneurial entry in the host economy. We have constructed a micro-panel of more than two thousand individuals in each of seventy countries, 2000–2009, linked to FDI by matching sectors. We find the relationship between FDI inflows and domestic entrepreneurship to be negative across all economies. This negative effect is much more pronounced in developed than developing economies and is also identified within industries, notably in manufacturing. Policies to encourage FDI via M&A need to consider how to counteract the prevailing adverse effect on domestic entrepreneurship.",

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AU - Weitzel, Utz

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AB - There are conflicting predictions in the literature about the relationship between FDI and entrepreneurship. This paper explores how foreign direct investment (FDI) inflows, measured by lagged cross-border mergers and acquisitions (M&A), affect entrepreneurial entry in the host economy. We have constructed a micro-panel of more than two thousand individuals in each of seventy countries, 2000–2009, linked to FDI by matching sectors. We find the relationship between FDI inflows and domestic entrepreneurship to be negative across all economies. This negative effect is much more pronounced in developed than developing economies and is also identified within industries, notably in manufacturing. Policies to encourage FDI via M&A need to consider how to counteract the prevailing adverse effect on domestic entrepreneurship.

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