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.

In analyzing the distinctive contribution of foreign subsidiaries and domestic firms to productivity growth in aggregate Belgian manufacturing, this paper shows that foreign ownership is an important source of firm heterogeneity affecting productivity dynamics. Foreign firms have contributed disproportionately large to aggregate productivity growth, but more importantly reallocation processes differ significantly between the groups of foreign subsidiaries and domestic firms.

The question of state assistance took on particular significance in the 1980s, when the markets became more integrated. European experience has shown that state assistance can effectively assist the adaptation of enterprises to new economic conditions. At the same time, it has a negative influence on competition.

Local content requirements have been observed empirically to protect vertically integrated domestic industries and induce inward foreign direct investment in intermediate goods production. The effects of a local content requirement is examined in the context of potential foreign direct investment and upstream manufacturing by a foreign multinational and potential vertical cooperation between the host country's upstream and downstream producers. In case of vertical cooperation domestic producers have an incentive to set the price of the intermediate strategically to discourage foreign direct investment. Vertical cooperation is found to enhance the rent-shifting effect of the local content requirement, whereas the foreign direct investment response increases price competition and reduces domestic profits. In both cases, manufacturing efficiency and foreign welfare decrease.

This paper examines how the allocation of entrepreneurial effort within a country is influenced by the country's institutional environment. We hypothesize that the likelihood that entrepreneurs launch a growth-oriented start-up is associated with the institutional environment in which entrepreneurs are embedded. We test our hypothesis using data on 44 countries over the three-year period from 2002 to 2004. The data are drawn from two sources: the Global Entrepreneurship Monitor and the World Economic Forum's Executive Opinion Survey. Our findings indicate that the likelihood of a growth-oriented start-up is positively related to a country's level of human capital targeted at entrepreneurship and the level of regulatory protection, but is negatively related to the extent of corruption and mistrust in public officials. JEL categories: D21, M13, O49 Keywords: institutions, entrepreneurship, resource, allocation