Title: Does foreign direct investment crowd our domestic entrepreneurship?
Authors: De Backer, Koenraad
Sleuwaegen, Leo
Issue Date: 2001
Publisher: K.U.Leuven - Departement toegepaste economische wetenschappen
Series Title: DTEW Research Report 0120 pages:1-24
Abstract: In analyzing firm entry and exit in the small open economy of Belgium, this paper empirically shows that import competition and foreign direct investment crowd out domestic entrepreneurs on product and labor markets. These results are in line with theoretical models of entrepreneurial choice in open economies that have explicitly included the effects of international competition on the formation of domestic entrepreneurs. The empirical analysis demonstrates that the inflow of foreign direct investment in Belgium reduces entrepreneurship measured through the entry of new domestic firms, while increasing domestic exit in the short term. Moreover, the results suggest that the decision of foreign firms to enter and/or exit a small economy is mainly determined by international conditions and less by domestic market conditions.
Publication status: published
KU Leuven publication type: IR
Appears in Collections:Department of Managerial Economics, Strategy and Innovation (MSI), Leuven

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