Does Foreign Direct Investment Stimulate New Firm Creation? In Search of Spillovers through Industrial and Geographical Linkages

Sun, Laixiang; Lee, In Hyeock; Hong, Eunsuk

Abstract

This paper examines the spillover effects of inward foreign direct investment (FDI) on the entrepreneurial activities of new firm creation through both industrial and geographical linkages. Using a dataset of 44,434 newly created small firms in 234 regions of South Korea in 2000–2004, this study finds that while the spillover impacts of FDI in the low-tech industry are positive and significant across almost all four possible combinations of the intra-/inter-regional and intra-/inter-sectoral channels, the impacts in the high-tech industry are largely intra-sectoral within the host region and across neighboring regions. Moreover, all statistically significant spillover effects follow an inverted ‘U’-shaped curvilinear trend.

Citation

Sun, L., Lee, I. H., & Hong, E. (2017). Does Foreign Direct Investment Stimulate New Firm Creation? In Search of Spillovers through Industrial and Geographical Linkages. Small Business Economics, 48(3), 613-631. https://doi.org/10.1007/s11187-016-9803-0

• Journal Article Type: Article
• Acceptance Date: Sep 6, 2016
• Online Publication Date: Sep 19, 2016
• Publication Date: Mar 9, 2017
• Deposit Date: Sep 20, 2016
• Publicly Available Date: Sep 20, 2016
• Journal: Small Business Economics
• Print ISSN: 0921-898X
• Electronic ISSN: 1573-0913
• Publisher: Springer
• Peer Reviewed: Peer Reviewed
• Volume: 48
• Issue: 3
• Pages: 613-631
• DOI: https://doi.org/10.1007/s11187-016-9803-0
• Additional Information: Additional Information : Accepted version of article published online by Springer 19 September 2016