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Does foreign direct investment crowed out domestic entrepreneurship?
De Backer, Koen Sleuwaegen, Leo
De Backer, Koen
Sleuwaegen, Leo
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Publication Type
Working paper
Editor
Supervisor
Publication Year
2002
Journal
Book
Publication Volume
Publication Issue
2002/14
Publication Begin page
Publication End page
Publication NUmber of pages
35
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Abstract
In analyzing firm entry and exit across Belgian manufacturing industries, this paper presents evidence that import competition and foreign direct investment discourage entry and stimulate exit of domestic entrepreneurs. These results are in line with theoretical occupational choice models, where it is shown that crowding out of domestic entrepreneurs through foreign direct investment works through selection in product and labor markets. However, the empirical results also suggest important long term structural positive effects of FDI on domestic entrpreneurship as a result of learning, demonstration, networking and linkage effects between foreign and domestic firms which tend to moderate or even reverse crowding out effects on domestic entrepreneurship.
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Keywords
Strategic Context & International Business, Strategy