Abstract-I examine how foreign presence affects the growth and survival of domestic firms. Separating a negative crowding out and positive technology spillovers, I analyze whether the crowding out effect is dynamic, that is, domestic firms cut production over time as foreign firms grow, or a static effect realized on foreign entry into the industry. Using 1994-2001 firmlevel Czech data, I find evidence of both technology spillovers and crowding out. However, crowding out is only short term; after initial entry shakeout, growing foreign sales increase domestic firm growth and survival, indicating domestic demand creation effect. However, I find no such benefits from domestic competition.

This paper analyzes the impact of FDI on domestic firm entry and firm size distributions in the Czech Republic during 1994-2000. We find that larger foreign presence stimulates the entry of domestic firms within the same industry, indicating the existence of positive horizontal spillovers from FDI. We also find evidence of significant vertical entry spillovers-FDI in downstream (upstream) industries initiates entry in upstream (downstream) sectors. Our results also show that entry spillovers through vertical linkages are stronger than horizontal spillovers and that while service industries benefit from both horizontal and vertical spillovers, manufacturing industries do not experience significant positive entry spillovers of any kind. We also find that country of origin of FDI matters-horizontal spillovers are driven by FDI from the EU countries. The right skewness of the firm size distributions in industries without FDI further emphasizes an important role of FDI presence for overall industry dynamics. Copyright � 2010 Blackwell Publishing Ltd.

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Using data on franchised chains, which are the type of single-product entities emphasized in industry dynamics models, we show that age and size affect growth and survival even after controlling for chain characteristics and unobserved chain-specific efficiency. This implies that age and size affect firm growth and survival for reasons other than those emphasized in learning-type models. We also find that several chain characteristics affect growth and survival directly, and thus controlling for firm characteristics is important. Finally, we find that chain size increases rather than decreases exit among young chains, and chains converge in size over time. ÃWe thank the Editor, an anonymous referee, participants at several conferences and seminars for their comments. We also thank Robert Picard for his assistance. The usual caveat applies.