Top PDF Does foreign direct investment crowd our domestic entrepreneurship?.

Does foreign direct investment crowd our domestic entrepreneurship?.

Does foreign direct investment crowd our domestic entrepreneurship?.

While foreign direct investment is similar to import competition with respect to product market competition, the entry of foreign firms generates however an additional e[r]

26 Read more

Does foreign direct investment crowd out domestic entrepreneurship?

Does foreign direct investment crowd out domestic entrepreneurship?

A complete analysis of the effect of FDI on domestic entrepreneurship requires structural long term effects also be taken into account. The literature on linkages between foreign multinationals and domestic firms in host countries has discussed different channels through which FDI may foster domestic entrepreneurship (see for an overview UNO (2001)). Managerial skills may spill over to domestic firms because of domestic managers leaving foreign firms and starting up their own business, and/or by domestic entrepreneurs watching successes and mistakes of foreign firms (Caves (1996)). Further on, networking activities of foreign firms may induce domestic entry through buyer-supplier relations and/or knowledge spillovers. Recent theoretical work in international business increasingly modeled the positive effects of FDI on domestic entrepreneurship through backward and forward linkages, showing that MNEs may foster the development of domestic firms in the host country (Rodriguez-Clare (1996), Markusen and Venables (1999)). The inclusion of the variable FORPRES i,t-1 controls for the existence of these positive networking, learning and linkage
Show more

28 Read more

Business Mentoring and Domestic Entrepreneurship in Nigeria’s Manufacturing Sub-sector: The place of Foreign Direct investment Inflows

Business Mentoring and Domestic Entrepreneurship in Nigeria’s Manufacturing Sub-sector: The place of Foreign Direct investment Inflows

Cantillon (1755) cited in Schumpeter (1934) was the first economist to use the term entrepreneur in a precise manner; he placed the entrepreneurial function in the field of economics by causing the principles of profit maximization and that of risk bearing to become part of its definition; Marshall (1930) saw the task of an entrepreneur as being inventive while Schumpeter (1934) assigned the critical role of innovation and power to the entrepreneur; Knight (1961) identified uncertainty as a primary attribute of the entrepreneurship theory while Casson (2005) conceptualized entrepreneurs as decision makers who improvise solutions to problems which cannot be solved by routine alone. Hence, entrepreneurship is the creation of new enterprises that give value to humanity by filling up a yearning vacuum (the neglected area). The individual who creates the new enterprise is called the entrepreneur. Within this definition, there are various levels of entrepreneurial activities, from a micro level in the village to a transnational initiative. In Nigeria, domestic entrepreneurship is often discussed in the context of Micro (informal), Small and Medium Scale (formal) Enterprises
Show more

12 Read more

Sectoral inflow of foreign direct investment and economic growth  in nigeria: a co integration analysis

Sectoral inflow of foreign direct investment and economic growth in nigeria: a co integration analysis

The neoclassical economists argue that FDI influences economic growth by increasing the amount of capital per person. However, because of diminishing returns to capital, it does not influence long-run economic growth. Even though FDI is positively correlated with economic growth, host countries require minimum human capital, economic stability and liberalized markets in order to benefit from long-term FDI inflows. Growth in neoclassical theory is brought about by increases in the quantity of factors of production and in the efficiency of their allocation. In a simple world of two factors (labour and capital), it is often presumed that low-income countries have abundant labour but scarce capital. This situation arises owing to shortage of domestic savings in these countries, which places constraint on capital formation and hence growth. Even where domestic inputs in addition to labour are readily available and hence no problem of input supply, increased production may be limited by scarcity of imported inputs upon which production processes in low- income countries are based. International capital flows (ICFs) readily become an important means of helping developing countries to overcome their capital shortage problems. One of the components of international capital flows is foreign private direct investment (FDI). Other components are Official flows from bilateral sources (e.g developed and OPEC countries), multilateral sources (such as the World Bank and its two affiliates, the international Development Association IDA, and the international finance corporation-IFC, on concessional and non-concessional terms and Commercial Bank loans (including export credits).
Show more

6 Read more

Does Foreign Aid Increase Foreign Direct Investment?

Does Foreign Aid Increase Foreign Direct Investment?

The notion that foreign aid and foreign direct investment (FDI) are comple- mentary sources of capital is conventional among governments and international cooperation agencies. This paper argues that the notion is incomplete. Within the framework of an open economy Solow model we show that the theoretical relation- ship between foreign aid and FDI is indeterminate. Aid may raise the marginal pro- ductivity of capital by …nancing complementary inputs, such as public infrastructure projects and human capital investment. However, aid may also crowd out produc- tive private investments if it comes in the shape of physical capital transfers. We therefore turn to an empirical analysis of the relationship between FDI and disag- gregated aid ‡ows. Our results strongly support the hypotheses that aid invested in complementary inputs draws in foreign capital while aid invested in physical capi- tal crowds out FDI. The combined e¤ect of these two types of aid is small but on average positive.
Show more

28 Read more

The Influence of Foreign Direct Investment on Domestic Investment Processes in Latvia

The Influence of Foreign Direct Investment on Domestic Investment Processes in Latvia

The second reason of CO effect can be the peculiarities of FDI distribution in Latvia which, as it was mentioned above, pretty precisely corresponds to the sectoral distribution of total investment. The FDI inflows in Latvia are oriented generally to the most dynamic sectors of the national economy. Some of these sectors , or ' are monopolized or are oligopolies (gas supply, telecommunication, retail sale of fuel, metal industry and others). In other sectors of foreign investor interest operate plenty of domestic firms (banking and insurance sector, real estate, wholesale trade and other services). And in many cases the firms with foreign capital simply displace or take over the domestic firms which are not enough competitive. This is especially relevant for Latvian economy joining the EU. Thus FDI inflow in Latvia rarely stimulate the domestic firms to invest more to increase their competitiveness. In some cases acquisitions, when foreign investor acquires control in a domestic firm to enter the local market and does nothing to improve its capacity, do not lead to significant increase in physical capital. Foreign investors are not active in less developed sectors of Latvian economy where FDI inflow could be a significant incentive for growth and can ensure the crowding in effect on investment of domestic firms.
Show more

10 Read more

Does FDI Stimulate or Crowd Out Domestic Investment in Saudi Arabia?

Does FDI Stimulate or Crowd Out Domestic Investment in Saudi Arabia?

The relation between foreign direct investment (FDI) and domestic investment has been the center of debate among economists in recent years. The existing literature has so far been in disagreement about the impact of FDI on domestic investment in developing countries. Saudi Arabia has focused efforts on liberalizing and attracting foreign investment over the last two decades, but its consequential effect on economic development remains a fertile area of research. Using three distinct econometric models, this research analyzes whether FDI stimulates domestic investment in Saudi Arabia in a complementary way or exert a crowding out effect over time. The results suggest that FDI and domestic investment are cointegrated in the long run and that FDI drives out domestic investment in most cases. Since most FDI flows have been to the service sector, important policy implications are offered at the end for better harnessing of FDI benefits and minimization of negative consequences.
Show more

15 Read more

R&D status and the performance of domestic firms in China's coal mining industry

R&D status and the performance of domestic firms in China's coal mining industry

The empirical results presented in this paper suggest that China’s policy of encouraging R&D in its mining sector is bearing fruit in that firms that conduct R&D are relatively more productive. Accordingly, the existing policies, such as the preferential tax rates, that encourage R&D are justified. An increase in the number of Chinese firms that conduct R&D increases domestic production, which can contribute to a decrease in China’s dependence on import of coal. Foreign direct investment in China’s coal industry does not appear to have contributed to a statistically significant impact on productivity, sales and profitability of domestic firms. Furthermore, foreign direct invest leads to a decline in the market share of domestic firms in China’s coal mining industry. This suggests that there is a need for restricting foreign direct investment in China’s coal mining industry. While foreign direct investment in China’s coal mining industry does not appear to be making a statistically significant contribution to productivity of domestic coal mining firms, based on the results presented in this paper, it can be argued that Chinese mining firms that conduct R&D are more likely to be able to compete with highly productive foreign firms both in China and abroad. As China’s R&D spending is expected to rise in the future, there is a strong possibility that productivity of domestic coal mining firms will continue to increase. As a result of the increase in productivity, China’s mining-related outward FDI is likely to increase in the future.
Show more

19 Read more

Does corruption matter for sources of foreign direct investment?

Does corruption matter for sources of foreign direct investment?

Larger markets offer higher demand and allow for economies of scale. Market size is closely linked to the size of GDP and can be decomposed into the level of income (GDP per capita) and the size of population (see, for instance, Chakrabati, 2001). The cost variables are linked to microfoundations in the context of trade (see, for instance, Anderson and Van Wincoop, 2003, 2004) but their role in the context of FDI may be somewhat ambiguous. In a typical model of horizontal FDI, where a firm serves a foreign market, FDI and cross-border trade can be seen as substitutes. A long distance may translate into high transportation costs and thus encourage FDI: building a plant in the destination country may be cheaper than shipping goods from the source country. On the other hand, in a model of vertical FDI, where a firm serves a domestic or international market but places certain stages of production overseas, high transportation costs would discourage FDI. In this case, an advantage of a low factor price abroad will be gradually eroded as transportation costs rise (see, for instance, Ramondo et al., 2013).
Show more

20 Read more

Correlates of High Technology Exports Performance in the Philippines

Correlates of High Technology Exports Performance in the Philippines

There are two relevant facts obtained in this particular study. First, official de- velopment assistance is suitable only in the short-term not on the long term ba- sis. Hence, inflows of this indicator should be channeled into the creation of in- novative programs and activities rather than focusing on the development projects. Second, the gross domestic product continues to decrease if consumers spend more on buying and consuming foreign goods rather than patronizing goods sold by local producers. As such, there is a continuing need to educate consumers on the impact of the trade deficit. Foreign direct investment and offi- cial development assistance are two important macroeconomic indicators ne- cessary for the full development of goods classified as high technology efforts. It is pervasive that over the years, the country suffered a significant setback in global trade due to continued trade deficits detrimental to the nation’s economy as this likewise increases in foreign debt. Economists, however, agree that trade deficits are sustainable as long as it does not exceed 3% of the nation’s gross do- mestic product (GDP) in the long run. The world is now increasingly migrating into industry 4.0 and to be able to keep at pace with the recent development po- licymakers who have to put more teeth in the creation of wealth through inno- vation. Initially, it requires a comprehensive development planning participated by the academe, the industry and relevant sectors. Finally, the use of symbolic regression (SR) will offer unbiased statistical results in future research.
Show more

12 Read more

The Impact of Foreign Direct Investment on Domestic Investment: Evidence from Sudan

The Impact of Foreign Direct Investment on Domestic Investment: Evidence from Sudan

the elapse of the initial period. No matter how the effects of FDI or mode of entry, the crowding-in or crowding out is a country-specific, for instance in Latin America, the crowd-out was due to little investment compared with Asia (Jan Mišun, 2002). Wang (2010) uses a panel data for 50 countries for the period 1970-2004, finds that FDI has a neutral effect on DI, however, the “contemporaneous FDI” crowd-out DI in DCs. The author recommends that FDI can “increase LDCs’ DI over time.” We find that most empirical studies on the effect of FDI on host countries are mostly confined to multi-countries-level; as mentioned before. Mottaleb and Kalirajan (2010) use a panel data analysis to identify the determinant factors of the inward FDI for 68 developing countries in Asia, Africa, and Latin America. Their study’s results reveal that countries with “larger GDPs; higher GDP growth rates; a higher proportion of international trade and a more business-friendly environment are more successful in attracting FDI.”
Show more

10 Read more

Does corruption matter for sources of foreign direct investment?

Does corruption matter for sources of foreign direct investment?

Larger markets offer higher demand and allow for economies of scale. Market size is closely linked to the size of GDP and can be decomposed into the level of income (GDP per capita) and the size of population (see, for instance, Chakrabati, 2001). The cost variables are linked to microfoundations in the context of trade (see, for instance, Anderson and Van Wincoop, 2003, 2004) but their role in the context of FDI may be somewhat ambiguous. In a typical model of horizontal FDI, where a firm serves a foreign market, FDI and cross-border trade can be seen as substitutes. A long distance may translate into high transportation costs and thus encourage FDI: building a plant in the destination country may be cheaper than shipping goods from the source country. On the other hand, in a model of vertical FDI, where a firm serves a domestic or international market but places certain stages of production overseas, high transportation costs would discourage FDI. In this case, an advantage of a low factor price abroad will be gradually eroded as transportation costs rise (see, for instance, Ramondo et al., 2013).
Show more

21 Read more

Impact of Foreign Direct Investment & Domestic Investment on Economic Growth of Malaysia

Impact of Foreign Direct Investment & Domestic Investment on Economic Growth of Malaysia

Epstein 2002). According to this view which is also supported by the industrial organisation theory, multinational enterprises (MNEs) employ a strategy to develop monopoly power over domestic firms in the host country (Hymer 1960; Caves 1996). The ownership-specific advantages of the MNEs (such as advanced technology, low transaction costs, managerial skills, etc.) can lead to monopoly power that could lead to the control of input supplies in the host economy (Dunning 1981). The tax holidays and subsidies provided by most host governments to MNEs gives them extra advantage in creating monopoly power. This will strengthen the competitive edge of the foreign firms over domestic firms that eventually will force domestic firms to exit the market. From this view, it is argued that FDI may substitute DI in the long-run. FDI may also substitute DI when MNEs compete with DI for limited investment opportunities and when it disturbs the backward linkages via the substitution of imports for local commodities (Noorzoy 1979). This view is further supported by empirical evidence found by several researchers. For example, Braunstein and Epstein (2002) applied the panel regression model on Chinese provincial data to investigate the crowding-out/ crowding-in effect of FDI on DI. Their results indicate that FDI crowds-out DI in China. From these results, they concluded that due to strong competition created by MNEs to indigenous firms, the social benefits of FDI are dissipated at least at provincial level. This forced the provinces to provide tax incentives, reduce wages and working conditions, and relax some regulations on environmental protection. Moreover, there is a tendency for investment policies to favour foreign investors over domestic private investors which in turn provide more privileges to foreigners to exploit scarce local resources (Huang 1998; 2003). Against this background, FDI is perceived to crowd-out DI.
Show more

15 Read more

Examining the Relative Roles of Domestic and Foreign Direct Investments in Nigeria

Examining the Relative Roles of Domestic and Foreign Direct Investments in Nigeria

The findings of Abu and Achegbulu (2011) on the impact of FDI on economic growth in Nigeria further buttressed the interaction between FDI and DI. In order to investigate the impact of FDI on economic growth in Nigeria and the causal relationship between them, liner regression and granger causality test were used. The data used were from Central Bank of Nigeria (CBN)’s Statistical Bulletin (CBN, 2015). The study has shown that FDI has a positive impact on GDP in Nigeria and the author therefore accept the alternative hypothesis. This also in line with the findings of Cristina and Babes (2014) who empirically test the hypothesis of FDI led capital accumulation in Central and Eastern European Countries (CEEC). More precisely, the study investigates the relationship between FDI and local investment, using a sample of 10 CEEC over the period 1990-2010. The study finds FDI to crowd out DI, while the effect decreases with time. The results also indicate that Greenfield FDI may develop long run complementarity with DI, while mergers and acquisitions do not prove any significant effect on DI.
Show more

7 Read more

Impact of foreign direct investment (FDI) on domestic investment in Republic of Croatia

Impact of foreign direct investment (FDI) on domestic investment in Republic of Croatia

Accordingly, the analysis and understanding how internal and external fac- tors affects the investments are extremely valuable in shaping policies of economic growth in any country. Since Republic of Croatia is a small, open and export-oriented economy with a long-term external imbalances with high sensitivity to external in- fluences, studying the impact of FDI as external factor on domestic investment as a factor of economic growth can have several benefits. Correspondingly, focus of this study will be the impact of foreign direct investments (FDI) on domestic investment in the Republic of Croatia. The impact of FDI on investment can be positive, neutral or negative. Positive impact will occur if invested FDI increases total investment for sum is greater than FDI themselves. If invested FDI increases total investment ex- actly for the height of its amount neutral effect will occur. Finally, if the domestic investment decreases regardless the FDI inflow a negative effect will occur. With the advent of negative effect of FDI on domestic investment Crowding out effect occurs. Conversely, with the advent of positive effect of FDI on domestic investment Crowd- ing in effect occurs.
Show more

25 Read more

Growth and Productivity in East Asia, NBER-East Asia Seminar on Economics, Volume 13

Growth and Productivity in East Asia, NBER-East Asia Seminar on Economics, Volume 13

The term “foreign direct investment” (FDI) usually brings to mind a significant contribution of FDI to domestic investment and to capital in- flows. However, there has been a lot of skepticism concerning the contri- bution of FDI to these engines of growth. As noted by Froot (1991), FDI (the purchase by a domestic resident of a controlling stake in a foreign company) actually requires neither capital flows nor investment in capac- ity. Conceptually, FDI is an extension of corporate control over interna- tional boundaries. Froot put it succinctly: “When Japanese-owned Bridge- stone takes control over the US firm Firestone, capital need not flow into the US. US domestic lenders can largely finance the equity purchase. Any borrowing by Bridgestone from foreign-based third parties also does not qualify as FDI (although it would count as an inflow of portfolio cap- ital into the US). And, of course, in such acquisition there is no investment expenditure; merely an international transfer in the title of corporate assets.” Does this example capture the essence of FDI in emerging econ- omies?
Show more

29 Read more

Foreign Direct Investment, Foreign Aid, and Socioeconomic Infrastructure in Developing Countries

Foreign Direct Investment, Foreign Aid, and Socioeconomic Infrastructure in Developing Countries

sources from the importable sector. As the capital intensity of importable sector is higher, some labor will also have to be moved from the exportable sector to the public good sec- tor. This would reduce the marginal product of foreign capital, which in turn would reduce foreign investment. Along similar lines of argument, we do find a crowding in effect of devel- opment aid on foreign investment. The theoretical model puts forward the two propositions to be tested empirically – (1) foreign aid used to finance public consumption crowds out foreign direct investment, and, (2) foreign aid that is used to fund infrastructure projects in developing countries help crowd in foreign investment. Our empirical model attempts to does verify these propositions. In presence of interaction effect of aid variables, we do find a crowding in effect of development aid on foreign investment. The key results of the chapter are as follows. First, consumption aid does crowd out foreign invstment when current account balance is sufficiently high. Secondly, development aid does crowd in FDI for an averagely sound (in terms of socioeconomic infrastructure) economy. Thirdly, for developing countries plagued with inflation, it pays to open up to international trade to allow influx of FDI. For a multinational organization or foreign investor, trade openness indicator is a more crucial factor to consider compared to inflation in the recipient country. Fourthly, a large developing country, in terms of market size, does claim a large share of the foreign investment across nations.
Show more

126 Read more

Foreign direct investment in R&D and domestic entrepreneurship in China's manufacturing industries

Foreign direct investment in R&D and domestic entrepreneurship in China's manufacturing industries

The empirical analysis presented in this paper is based on data sourced from the Enterprise Data, National Bureau of Statistics (NBS), Beijing, China. Each year, NBS collects data from firms to compile the ‘Industry’ section of the China Statistical Yearbook. The dataset, which covers the entire manufacturing sector, accounts for over 85 per cent of China’s total industrial output. We focus on the transport equipment and electrical machinery and equipment manufacturing industries as technology (and R&D) plays an important role in these two industries. The sample includes the entry and exit of both domestic and foreign firms but in this paper we focus on domestic firms. The sample period is 2005-2007, where all nominal variables have been adjusted for inflation. 15 Table 1 provides summary statistics
Show more

40 Read more

Does inward foreign direct investment boost the productivity of domestic firms?

Does inward foreign direct investment boost the productivity of domestic firms?

Other spillover mechanisms may operate along regional lines. One commonly proposed avenue (since at least Marshall, 1920) is via labor turnover. If at least some of the knowledge particular to foreign affiliates is embodied in their labor force, then as affiliate employees leave to work for domestic firms this knowledge may move as well. For example, Song, et al (2001) use U.S. patent records to trace the movement of scientists between domestic and foreign firms (also see Motta, et al, 1999, and Moen, 2000). This knowledge need not be firm-specific (e.g., inventory-control or management techniques). If inter-regional labor mobility within a country is low, then these spillovers are likely to be concentrated within regions where the affiliates operate rather than dispersed country-wide. More generally, regional labor-market spillovers can be thought of as one important kind of agglomeration economy that can induce firms to locate near each other in space. Krugman (1991) offers some formal models of agglomeration issues.
Show more

40 Read more

Does foreign direct investment crowd in or crowd out domestic investment? : evidence from the European Union

Does foreign direct investment crowd in or crowd out domestic investment? : evidence from the European Union

In an analysis of firm entry and exit in Belgian manufacturing industries, De Backer and Sleuwaegen (2003) find that FDI and import competition positively affects exit and negatively affects entry of domestic enterprises. Their results show that an increase in FDI of 10% causes the entry rate of domestic firms to fall by 7% in the long term. Since entry into the market itself requires initial investments and staying in the market can lead to making an extra investment, their negative findings can be interpreted as a loss of potential domestic investment. According to Sauramo (2008), a crowding-out effect in developed countries can be attributed to evidence that outward FDI reduces domestic investment in Finland. The majority of the decline in the domestic investment rate in the corporate sector is explained by an increase of outward FDI flows since Finland has transformed its economy from a capital importing to a capital exporting one. Outward FDI directly reduces the financial resources that would otherwise be available for domestic investment. There is, of course, the possibility that other local firms operating in the country may use the investment opportunities that firms investing abroad ignore. These ideas area supported by Feldstein (1994) who estimating that outward FDI reduces domestic investment on a one for one basis 15 out of 18 OECD countries.
Show more

17 Read more

Show all 10000 documents...

Related subjects