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Does foreign direct investment stimulate new firm creation? In search of spillovers through industrial and geographical linkages

Laixiang Sun (), In Hyeock Lee () and Eunsuk Hong ()
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Laixiang Sun: University of Maryland
In Hyeock Lee: Loyola University Chicago
Eunsuk Hong: SOAS University of London

Small Business Economics, 2017, vol. 48, issue 3, 613-631

Abstract: 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.

Keywords: Inward foreign direct investment; New firm creation; Entrepreneurship; Sectoral and spatial analysis; F23; L26; M13; R12 (search for similar items in EconPapers)
Date: 2017
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