The Impact of FDI on Entrepreneurship in European Countries: Mechanism and Strength
Qiuqin He* and Tsung-Kuo Tien-Liu**
*Institute of Quantitative and Technical Economics, Chinese Academy of Social Sciences
Room 1420, Technology Building, 5 Jianguomennei Street, Beijing 100732, China
**Office of Physical Education, Fu Jen Catholic University
8F.-2, No.127 Dazhong South Street, West District, Taichung City 40347, Taiwan
The role of foreign direct investment (FDI) in promoting entrepreneurship has attracted increasing attention from academics and policymakers. However, empirical research has failed to consider model uncertainty, leading to contradictory results. This study designs a new semi-parametric path approach to identify the mechanism and strength of FDIs’ impact on entrepreneurial activities through three levels of difference: the general, time, and country. Our results indicate that a conflicting relationship may occur between FDIs and entrepreneurial activity because the opposing influences at these three levels negate them. Nevertheless, our detailed results are important for guiding business organizations not only among the European Union, but also in specific European countries.
-  Z. J. Acs, D. B. Audretsch, R. J. Phillips, and S. Desai, “The entrepreneurship-philanthropy nexus: nonmarket source of American entrepreneurial capitalism,” Jena Economic Research Paper No.2007-025; Hudson Institute Research Paper No.07-04, doi:10.2139/ssrn.1019443, 2007.
-  Z. J. Acs, D. B. Audretsch, P. Braunerhjelm, and B. Carlsson, “Growth and entrepreneurship,” Small Business Economics, Vol.39, No.2, pp. 289-300, 2012.
-  D. Urbano, S. Aparicio, M. Guerrero, M. Noguera, and J. Torrent-Sellens, “Institutional determinants of student employer entrepreneurs at Catalan universities,” Technological Forecasting and Social Change, Vol.123, pp. 271-282, 2017.
-  C. T. Albulescu and M. Tămăşilă, “Exploring the role of FDI in enhancing the entrepreneurial activity in Europe: a panel data analysis,” Int. Entrepreneurship and Management J., Vol.12, No.3, pp. 629-657, 2016.
-  K. De Backer and L. Sleuwaegen, “Does foreign direct investment crowd out domestic entrepreneurship?,” Review of Industrial Organization, Vol.22, No.1, pp. 67-84, 2003.
-  D. De Clercq, J. Hessels, and A. Van Stel, “Knowledge spillovers through FDI and trade and entrepreneurs’ export orientation,” Academy of Management Annual Meeting Proc., Vol.2007, No.1, 2007.
-  M. Ayyagari and R. Kosová, “Does FDI facilitate domestic entry? Evidence from the Czech Republic,” Review of Int. Economics, Vol.18, No.1, pp. 14-29, 2010.
-  J. Knoben, R. H. F. Ponds, and F. G. V. Oort, “Employment from new firm formation in the Netherlands: Agglomeration economies and the Knowledge Spillover Theory of Entrepreneurship,” Entrepreneurship & Regional Development, Vol.23, No.3-4, pp. 135-157, 2011.
-  P. H. Kim and M. Li, “Injecting demand through spillovers: foreign direct investment, domestic socio-political conditions, and host-country entrepreneurial activity,” J. of Business Venturing, Vol.29, No.2, pp. 210-231, 2014.
-  H. Herrera-Echeverri, J. Haar, and J. B. Estévez-Bretón, “Foreign direct investment, institutional quality, economic freedom and entrepreneurship in emerging markets,” J. of Business Research, Vol.67, No.9, pp. 1921-1932, 2014.
-  T. Baker, E. Gedajlovic, and M. Lubatkin, “A framework for comparing entrepreneurship processes across nations,” J. of Int. Business Studies, Vol.36, No.5, pp. 492-504, 2005.
-  S. Pathak, E. Xavier-Oliveira, and A. O. Laplume, “Influence of intellectual property, foreign investment, and technological adoption on technology entrepreneurship,” J. of Business Research, Vol.66, No.10, pp. 2090-2101, 2013.
-  S. Danakol, S. Estrin, P. D. Reynolds, and U. Weitzel, “Foreign direct investment and domestic entrepreneurship: blessing or curse?,” IZA Discussion Paper No.7796, 2013.
-  S. Pathak, A. Laplume, and E. Xavier-Oliveira, “Inbound foreign direct investment and domestic entrepreneurial activity,” Entrepreneurship & Regional Development, Vol.27, No.5-6, pp. 334-356, 2015.
-  S. Wennekers, A. van Wennekers, R. Thurik, and P. Reynolds, “Nascent entrepreneurship and the level of economic development,” Small Business Economics, Vol.24, No.3, pp. 293-309, 2005.
-  P. Hall, Q. Li, and J. S. Racine, “Nonparametric estimation of regression functions in the presence of irrelevant regressors,” The Review of Economics and Statistics, Vol.89, No.4, pp. 784-789, 2007.
-  W. Gu, X. Qian, and J. Lu, “Venture capital and entrepreneurship: a conceptual model and research suggestions,” Int. Entrepreneurship and Management J., Vol.14, No.1, pp. 35-50, 2018.
-  G. D. A. MacDougall, “The Benefits and Costs of Private Investment from Abroad: A Theoretical Approach,” Economic Record, Vol.36, Issue 73, pp. 13-35, 1960.
-  N. Barbosa and V. Eiriz, “Regional variation of firm size and growth: the Portuguese case,” Growth and Change, Vol.42, No.2, pp. 125-158, 2011.
-  A. L. Paulson and R. Townsend, “Entrepreneurship and financial constraints in Thailand,” J. of Corporate Finance, Vol.10, No.2, pp. 229-262, 2004.
-  S. J. Vliamos and N. G. Tzeremes, “Factors influencing entrepreneurial process and firm start-ups: Evidence from central Greece,” J. of the Knowledge Economy, Vol.3, No.3, pp. 250-264, 2012.
-  C. Felzensztein, E. Gimmon, and C. Aqueveque, “Entrepreneurship at the periphery: Exploring framework conditions in core and peripheral locations,” Entrepreneurship Theory and Practice, Vol.37, No.4, pp. 815-835, 2013.
-  Q. Liu, R. Lu, and C. Zhang, “Entrepreneurship and spillovers from multinationals: Evidence from Chinese private firms,” China Economic Review, Vol.29, pp. 95-106, 2014.
-  A. Larin and E. Tarunina, “Entrepreneurial activity and economic development: The shape of the relationship,” Applied Econometrics, Vol.37, No.1, pp. 3-26, 2015.
-  W. J. Baumol, “Entrepreneurship: Productive, Unproductive, and Destructive,” J. of Political Economy, Vol.98, No.5, Part 1, pp. 893-921, 1990.
-  A.-M. Baron, “Les Scènes de la vie privée ou le regard interdit,” Orbis Litterarum, Vol.55, No.6, pp. 434-446, 2000.
-  D. G. Blanchflower, A. Oswald, and A. Stutzer, “Latent entrepreneurship across nations,” European Economic Review, Vol.45, No.4-6, pp. 680-691, 2001.
-  T. S. Manolova and R. V. Eunni, “Institutions and entrepreneurship in Central and Eastern Europe: A Four-Country Comparison of University Students’ Perceptions,” pp. 569-576, 2012.
-  T. Gries and W. Naudé, “Entrepreneurship and human development: A capability approach,” J. of Public Economics, Vol.95, No.3-4, pp. 216-224, 2010.
-  J. Fan and T. Huang, “Profile likelihood inferences on semiparametric varying-coefficient partially linear models,” Bernoulli, Vol.11, No.6, pp. 1031-1057, 2005.
This article is published under a Creative Commons Attribution-NoDerivatives 4.0 Internationa License.