Inward Foreign Direct Investment and Domestic Entrepreneurship: A Regional Analysis of New Firm Creation in Korea

In Hyeock Lee, Eunsuk Hong and Laixiang Sun

Regional Studies, 2014, vol. 48, issue 5, 910-922

Abstract: Lee I. H., Hong E. and Sun L. Inward foreign direct investment and domestic entrepreneurship: a regional analysis of new firm creation in Korea, Regional Studies . This paper assesses the intra- and inter-regional impacts of inward foreign direct investment on the decisions of establishing new firms in a given location by prospective local entrepreneurs, an important topic which has been largely neglected in the literature. Using a large firm-level dataset of 44 434 newly created small firms in 234 regions of South Korea in 2000-2004, the econometric estimations indicate that both intra- and inter-regional foreign direct investment spillovers influence entrepreneurs' decisions to situate new firms in a specific region, with inverted 'U'-shaped curvilinear effects. The findings also suggest that the effect of regional foreign direct investment spillover on new firm creation is largely a localized phenomenon.

Date: 2014
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DOI: 10.1080/00343404.2012.690067

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