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

Thompson, P. ORCID: 0000-0003-1961-7441 and Zang, W., 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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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: Journal article
Publication Title: Growth and Change
Creators: Thompson, P. and Zang, W.
Publisher: Wiley
Date: 11 March 2023
ISSN: 0017-4815
Rights: © 2023 the authors. Growth and Change published by Wiley Periodicals LLC. This is an open access article under the terms of the Creative Commons Attribution-NonCommercial-NoDerivs (CC BY-NC-ND 4.0) License, which permits use and distribution in any medium, provided the original work is properly cited, the use is non-commercial and no modifications or adaptations are made.
Divisions: Schools > Nottingham Business School
Record created by: Jonathan Gallacher
Date Added: 27 Mar 2023 09:36
Last Modified: 27 Mar 2023 09:36

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