Unlocking the Global Chessboard: FDI Policies and their Impact on Entrepreneurial Ecosystems

Samuel Yeboah

MPRA Paper from University Library of Munich, Germany

Abstract: This analysis delves into the diverse landscape of Foreign Direct Investment (FDI) policies within developing nations and their profound implications for entrepreneurial ecosystems. Through comparative analysis, the study uncovers a range of strategies countries employ, from liberal to restrictive FDI approaches, which significantly impact interactions between foreign investors and local startups, ultimately shaping innovation, growth, and competitiveness in entrepreneurial ecosystems. In some developing nations, liberal FDI policies play a pivotal role, strategically designed to attract foreign capital, technology, and expertise. For instance, Singapore and Ireland have implemented proactive, incentive-driven measures, particularly in high-tech sectors, resulting in thriving entrepreneurial ecosystems integrated into global value chains. These policies foster collaborative environments, granting local startups improved access to capital, markets, and invaluable knowledge from foreign investors. Conversely, other nations adopt more restrictive FDI policies to safeguard strategic sectors and protect domestic enterprises from undue foreign influence. India and China exemplify this approach, erecting regulatory barriers in industries like telecommunications and banking to retain policy autonomy and nurture domestic capabilities. While preserving local interests, these policies inadvertently limit access to FDI benefits, including advanced technologies, skills, and global market connectivity. Governments often utilize incentive schemes such as tax breaks and subsidies to attract FDI, making their countries appealing to foreign investors and providing local startups with essential resources and mentorship, significantly contributing to their growth. However, ownership restrictions, particularly in strategically significant sectors, serve to protect domestic control but may discourage potential investors and hinder collaboration between startups and foreign entities. Striking a balance between preserving sovereignty and promoting global integration becomes a pivotal challenge for these nations. The regulatory environment plays a central role in shaping the relationship between FDI policies and entrepreneurial ecosystems. Favourable regulatory frameworks that encourage competition, safeguard intellectual property and simplify business registration drive innovation and attract FDI, which subsequently benefits startups. Transparent regulations that reduce uncertainty and risks bolster investor confidence, making FDI a potential lifeline for local startups.

Keywords: Entrepreneurial Ecosystems; Comparative Analysis; Liberal FDI Policies; Restrictive FDI Policies; Incentive Schemes; Ownership Restrictions; Regulatory Environment; Innovation; Investor Confidence; Ease of Doing Business; Policy Alignment (search for similar items in EconPapers)
JEL-codes: F21 F23 G38 L26 (search for similar items in EconPapers)
Date: 2023-07-18, Revised 2023-08-28
New Economics Papers: this item is included in nep-cse, nep-ent, nep-int, nep-sbm and nep-sea
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https://mpra.ub.uni-muenchen.de/118473/1/FDI%20AND%20POLICIES%20RESEARCHGATE.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/118474/1/FDI%20AND%20POLICIES%20FOR%20MPRA.pdf revised version (application/pdf)

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