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Which sectoral FDI flows crowd in domestic entrepreneurship?

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  • Nadia Doytch

Abstract

This study examines the impact of several sector- and industry-level FDI inflows - mining, manufacturing, total services, and financial services - on domestic entrepreneurship, which is measured as the density of newly registered firms. We use a unique dataset of sectoral FDI coupled with data from the World Bank Doing Business Indicators for a panel of up to 96 countries and the period 2004-2012. Our model controls for fixed capital formation, quality of institutions, as well as several cost of doing business indicators: the cost of starting a business, tax rates, and export costs. We use a dynamic panel estimator that allows us to exploit the time-varying characteristics of the data and to control for omitted variable biases and endogeneity issues in the data. We find that although services and mining FDI are related to crowding-in of domestic entrepreneurship, manufacturing FDI is associated with a crowding-out effect.

Suggested Citation

  • Nadia Doytch, 2016. "Which sectoral FDI flows crowd in domestic entrepreneurship?," Global Business and Economics Review, Inderscience Enterprises Ltd, vol. 18(2), pages 124-135.
    • Handle: RePEc:ids:gbusec:v:18:y:2016:i:2:p:124-135
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    Cited by:

    1. Wei Feng, 2021. "How can entrepreneurship be fostered? Evidence from provincial‐level panel data in China," Growth and Change, Wiley Blackwell, vol. 52(3), pages 1509-1534, September.
    2. Elheddad, Mohamed, 2019. "Foreign direct investment and domestic investment: Do oil sectors matter? Evidence from oil-exporting Gulf Cooperation Council economies," Journal of Economics and Business, Elsevier, vol. 103(C), pages 1-12.

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