Does FDI facilitate Domestic Entrepreneurship? Evidence from the Czech Republic
How does foreign direct investment (FDI) affect industry dynamics? In this paper, we analyze the impact of FDI on domestic firm entry in 245 industries in the Czech Republic during 1994 to 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 via the presence of backward (forward) linkages. Our results also show that entry spillovers through forward linkages dominate both horizontal spillovers and spillovers through backward linkages. However, the spillovers vary substantially across industries: while service industries benefit from both horizontal and vertical spillovers, manufacturing industries do not experience significant positive entry spillovers of any kind. In addition, we find that while vertical spillovers prevail among competitive industries, horizontal spillovers dominate in less competitive industries. We also find differences in firm size distributions between industries with and without FDI, further suggesting the influence of FDI presence on industry dynamics.
Year of publication: |
2006-09
|
---|---|
Authors: | Kosova, Renata ; Ayyagari, Meghana |
Institutions: | School of Business, George Washington University |
Saved in:
freely available
Saved in favorites
Similar items by person
-
Do Foreign Firms Crowd Out Domestic Firms? Evidence from the Czech Republic
Kosova, Renata, (2006)
-
Firm Survival and Growth in Retail and Service Industries: Evidence from Franchised Chains
Kosova, Renata, (2006)
-
Minimum Wage Increases and Employer Performance
Agarwal, Sumit, (2020)
- More ...