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

Danakol, Seçil Hülya, Estrin, Saul, Reynolds, Paul and Weitzel, Utz (2016) Foreign direct investment via M&A and domestic entrepreneurship: blessing or curse? Small Business Economics . ISSN 0921-898X

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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.

Item Type:	Article
Official URL:	http://link.springer.com/journal/11187
Additional Information:	© 2016 Springer Science+Business Media
Library of Congress subject classification:	H Social Sciences > HB Economic Theory
Sets:	Departments > Management
Date Deposited:	25 Oct 2016 10:28
URL:	http://eprints.lse.ac.uk/68118/

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