The relationship between foreign direct investment and domestic entrepreneurship: The impact and scale of investments in China

Thompson, Piers and Zang, Wenyu (2023) The relationship between foreign direct investment and domestic entrepreneurship: The impact and scale of investments in China. Growth and Change. ISSN 0017-4815

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Abstract

Both entrepreneurship and foreign direct investment (FDI) are frequently identified as being sources of local and regional economic growth. However, the relationship between the two is not always clear, with a negative competition effect and a positive demand effect potentially present. China provides an interesting case to study with its large state-owned sector, combined with a recent history of successfully attracting considerable FDI. This study examines the relationship between self-employment and different elements of foreign influence (FI) at a provincial level. The results imply that foreign investment reduces the level of self-employment, whilst the number of foreign enterprises and foreign exports have positive effects. The results therefore show the importance in considering multiple perspectives in terms of FI. It appears that policies that attract individual large investments suppress the development of domestic enterprise as predicted by the competition effect, but where more foreign enterprises are present, and a cluster starts to develop, a demand effect appears to take over. This means that provincial government policy may need to be more nuanced to avoid economies being highly reliant on a limited number of what might be quite footloose larger foreign employers.

Item Type:	Article
Identification Number:	10.1111/grow.12671
Dates:	Date Event 11 February 2023 Accepted 11 March 2023 Published Online
Subjects:	CAH15 - social sciences > CAH15-02 - economics > CAH15-02-01 - economics
Divisions:	Faculty of Business, Law and Social Sciences > College of Accountancy, Finance and Economics > Centre for Accountancy Finance and Economics Faculty of Business, Law and Social Sciences > College of Business, Digital Transformation & Entrepreneurship
Depositing User:	Wenyu Zang
Date Deposited:	17 Apr 2023 15:21
Last Modified:	20 Jun 2024 12:05
URI:	https://www.open-access.bcu.ac.uk/id/eprint/14336

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