Does FDI promote entrepreneurial activities? A meta-analysis

Abstract

This study uses meta-analysis to analyze 557 estimates from 35 studies that estimate the effect of inward FDI on entrepreneurial activity. We address two questions: (i) Does FDI lead to greater entrepreneurial activity in host countries? (ii) What factors are responsible for the different estimates across studies? In addressing these questions, we make two methodological contributions. We extend the new Andrews-Kasy meta-analysis estimators (Andrews & Kasy, 2019) to allow for explanatory variables, and we develop a nested framework of multiple meta-analysis models that allows for testing between models and model selection. We estimate that, across all studies, the average estimated effect of FDI on entrepreneurship is positive but small in size, and statistically insignificant. In contrast, the average effect from studies that control for endogeneity is negative and statistically significant.

Determinants of Foreign Direct Investment in the Least Developed Countries: Static and Dynamic Panel Data Evidence

“…In capturing the level of economic development of a country, the market size of the host country (measured by per capita GDP) is found to be the most important factor in attracting FDI ( Hong et al, 2021).A larger market size attracts FDI as per capita GDP growth is positively and substantially correlated with levels of FDI inflows (Cleeve et al, 2015).Local funding climate, per capita GDP growth and trade openness, are positive and significantly correlated for commodities in exporting countries (Chipalkatti et al, 2021).…”

“…From a historical point of view, the ending of the colonial era (latest 1950s and early 1960s for most LDCs) is the turning point in their evolution; between the transfer of power, and consequent social issues, new elites embraced the responsibility of providing their countries with strategies to govern efficiently and manage their growth. The reality that became immediately obvious is that many of these newly independent nations inherited (i) poor institutions; (ii) inadequate infrastructure, human, financial, and physical resources; (iii) a barely recognisable private sector; and (iv) fundamentally weak economies (UNCTAD, 2021).In comparison to manufacturing-based economies, LDCs were confronted with the reality of strongly competitive international trade and negative positions in commerce as their commodities continued to perform badly and showed lowincome elasticity of demand (Chipalkatti et al, 2021;Hong et al, 2021).…”

“…Other benefits of FDI are reflected in an increase in domestic investments, an inflow of superior technology, and increasing competition in the host country (Jensen, 2003;Hong et al, 2021). At the same time, FDI increases challenges faced by local traders and may add to pollution and inequality.…”

“…In terms of social, health, economic, and foreign-trade factors, they constitute a heterogeneous group of countries (Jeníček & Grófová, 2014). LDCs are distinguished not only by their widespread poverty but also by a structural weakness of their economic, institutional, and human resources, often conditioned by geographical impediments (Hong et al, 2021). Characterised by a low level of socio-economic development (Chipalkatti et al, 2021), LDCs have limited capacity to generate their own domestic revenue and are thus economically vulnerable to external shock (Gonzalez, 2017).…”

Like the new and hate the old: The impact of fiscal decentralization on regional development strategy

“…Tian [59] compares the efficiency of tax rate reduction policy and investment cost subsidy policy for the host government to attract FDI. Some literature focus on the impacts of the inflow of FDI, such as entrepreneurial activities [60], country welfare [61], regional economic growth [62], pollution [63], et al However, a lack of research studies on the reasons why local governments change their preference for investment attraction. We provide the extension to motivate and guide future research on the channels linking fiscal decentralization and local governments' investment attraction action.…”