Does Foreign Direct Investment Matter to Domestic Entrepreneurship? The Mediating Role of Strategic Alliances

Abstract

ABSTRACT This study investigates the impact of foreign direct investment (FDI) on domestic entrepreneurship in a host country by analysing a unique panel dataset of FDI and startup rates in Korean industries. It finds that FDI with a time lag has a positive effect on the startup rate, implying that inward FDI promotes domestic entrepreneurship. It shows that the strategic alliances moderate the relationship between FDI and the startup rate, depending upon the types of FDI and alliances. Both intra- and inter-industry alliances enhance the positive effect of foreign greenfield investment, while inter-industry alliances mitigate the effect of foreign acquisition.