Does Foreign Direct Investment Crowd Out Domestic Entrepreneurship?
De Backer, Koen Sleuwaegen, Leo
De Backer, Koen
Sleuwaegen, Leo
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Publication Type
Journal article with impact factor
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Supervisor
Publication Year
2003-02
Journal
Review of Industrial Organization
Book
Publication Volume
22
Publication Issue
1
Publication Begin page
67
Publication End page
84
Publication Number of pages
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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 that predict foreign direct investment would crowd out domestic entrepreneurs through their selections in product and labor markets. However, the empirical results also suggest that this crowding out effect may be moderated or even reversed in the long-run due to the long term positive effects of FDI on domestic entrepreneurship as a result of learning, demonstration, networking and linkage effects between foreign and domestic firms.
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Keywords
38 Economics, 3801 Applied Economics, 3802 Econometrics