Academic journal article Journal of Economics & Management

Inward FDI and Entrepreneurship Rate: Empirical Evidence on Selected Effects of FDI in Visegrad Countries 1

Academic journal article Journal of Economics & Management

Inward FDI and Entrepreneurship Rate: Empirical Evidence on Selected Effects of FDI in Visegrad Countries 1

Article excerpt

Introduction

Foreign direct investment (FDI) has been investigated by many scholars for decades. Literature offers numerous concepts, models and theories explaining FDI inflows and outflows. The most popular classification of these theories divides them into three groups [Kilic, Bayar, Arica 2014, pp. 8-15], namely macrolevel theories, micro-level theories as well as the development theories, which combine both macro- and micro-aspects. Trçpczynski [2015] notices that the FDI-related theoretical concepts at the level of host countries are diversified and multifaceted, including such topics as location determinants [Wach, Wojciechowski 2014, pp. 157-170; 2016; Wojciechowski 2013, pp. 7-22] or effects of FDI for home and host countries [Marona, Bieniek 2013, pp. 333-350].

The main purpose of this article is to explore the impact of inward FDI on entrepreneurship in V4 countries. The reliable sources of data were used, among them statistical data of Eurostat and the UNDP. All calculations and estimation were conducted in R-Studio® and JMulti® computer professional software.

1. Theoretical background

The impact of FDI on economic growth has been a topical issue for several decades [Beugelsdijk, Smeets, Zwinkels 2008, pp. 452-472]. Empirical evidence on the relationship between FDI and economic growth is still inconclusive, and this topic is often undertaken by researchers. Recent studies suggest that the presence of FDI could under appropriate conditions positively or negatively impact economy of host country. It depends on structure of FDI inflow, types of investment, technological gap, productivity and many other determinants. Most researchers perform analyses at the macroeconomic level without taking into account industry or even microeconomic conditions which could foster or limit positive spillover effects. Hanousek, Kocenda and Maurel [2010] prepared a review of empirical investigations into the analysis on impact of FDI on productivity, spillover effects in European emerging markets. Once study results revealed differential economic impacts between horizontal FDI (market seeking) and vertical FDI (efficiency seeking) [Beugelsdijk, Smeets, Zwinkels 2008, pp. 461].

Literature includes numerous examples of the use of quantitative methods in the context of these relationships. The prior research results indicate a two-way Granger causality in the sense of the size of FDI and GDP [Chloe 2003, pp. 55-57]. The analyses carried out using panel models allow to investigate that the impact of FDI on the growth of GDP depends on the economic conditions of the host country [Bengoa, Sanchez-Robles 2003, pp. 529-545]. The recent research using cointegrated autoregressive models for the Polish economy suggest a positive impact of FDI on GDP, unemployment and foreign trade [Marona, Bieniek 2013, p. 340; Balcerzak, Zurek 2010, p. 20]. The problem of the impact of FDI on the economy requires further in-depth research because results of numerous of studies on the impact of FDI on the economy are inconsistent (Table 1).

From the perspective of international business, FDI is the most advanced entry mode into international markets [Marona, Bieniek 2013, p. 340; Balcerzak, Zurek 2010, p. 20], being a sign of international entrepreneurship [Daszkiewicz, Wach 2014]. The literature suggests that FDI could either stimulate or inhibit local entrepreneurship [Danahol et al. 2013], which is understood widely as doing business by any entities, mainly private ones, in the local environment. Let us focus on this and elaborate more in detail. We assume that inward FDI may affect private entrepreneurship in the host economy by stimulating cooperation between multinational corporations and local firms. Ayyagari and Kostova [2010] found that in the Czech Republic FDI has an unambiguous positive impact on entry rates of domestic firms through both intra-industry (horizontal) and inter-industry (vertical) spillovers. Albulescu and Tämä§iläa [2014] showed that the impact of FDI on the overall entrepreneurial activity is relatively poor, however, the findings are more conclusive if analysed separately between necessity and opportunity entrepreneurs (using GEM data for necessity-based and opportunity-based entrepreneurship). …

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