"Harmonizing FDI and Local Entrepreneurship: Strategies for Inclusive Growth"

Yeboah, Samuel and Gyan, Sylvester and James, Bright (2023): "Harmonizing FDI and Local Entrepreneurship: Strategies for Inclusive Growth".

Abstract

This systematic review explores the complex dynamics between Foreign Direct Investment (FDI) and local entrepreneurial ecosystems, focusing on their impact on startups and Small and Medium-sized Enterprises (SMEs). FDI has emerged as a critical driver of economic development and innovation in an increasingly globalized world. While FDI offers numerous advantages, it also presents challenges, particularly for local startups. Positive effects of FDI include improved access to funding, enhanced resources, market expansion, talent attraction, and knowledge sharing. These benefits can boost the competitiveness and profitability of startups, enabling them to enter new markets and scale their operations. However, FDI can also have negative repercussions, such as increased competition, dependency risks, unequal partnerships, and potential loss of intellectual property. These challenges underscore the need for a nuanced approach to harness the benefits of FDI while mitigating its risks. To address these issues, strategies to maximize FDI's benefits for entrepreneurship are discussed. These strategies encompass creating supportive ecosystems, diversifying funding sources, promoting collaborative innovation, strengthening intellectual property protection, investing in education and skill development, facilitating cultural integration, and establishing startup incubation programs. Ultimately, achieving a harmonious balance between FDI and local entrepreneurship is essential for driving inclusive economic growth and sustainable innovation. This systematic review provides insights to guide policymakers, entrepreneurs, and investors in optimizing the advantages of FDI while proactively addressing its inherent challenges.

• Item Type: MPRA Paper
• Language: English
• Keywords: Foreign Direct Investment (FDI); Entrepreneurial Ecosystems; Local Startups; Small and Medium-sized Enterprises (SMEs); Economic Development; Innovation; Competition; Power Dynamics; Intellectual Property Protection; Technology Transfer
• Subjects: D - Microeconomics > D2 - Production and Organizations > D22 - Firm Behavior: Empirical Analysis; F - International Economics > F2 - International Factor Movements and International Business > F21 - International Investment ; Long-Term Capital Movements; F - International Economics > F2 - International Factor Movements and International Business > F23 - Multinational Firms ; International Business; L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L25 - Firm Performance: Size, Diversification, and Scope; L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L26 - Entrepreneurship; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M1 - Business Administration > M13 - New Firms ; Startups; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M2 - Business Economics > M21 - Business Economics; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O31 - Innovation and Invention: Processes and Incentives; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O33 - Technological Change: Choices and Consequences ; Diffusion Processes; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O34 - Intellectual Property and Intellectual Capital

References

Audretsch, D. B., & Belitski, M. (2021). Entrepreneurial ecosystems: the foundation of place-based economic development. Oxford Research Encyclopedia of Business and Management.

Audretsch, D. B., & Link, A. N. (2012). Entrepreneurship and innovation: Public policy frameworks. The Journal of Technology Transfer, 37(1), 1-171

Bosma, N., & Kelley, D. (2019). Global Entrepreneurship Monitor 2018/2019 Global Report. Global Entrepreneurship Research Association.

Brookings. (2018). The state of competition and dynamism: Facts about concentration, start-ups and related policies. Retrieved from https://www.brookings.edu/articles/the-state-of-competition-and-dynamism-facts-about-concentration-start-ups-and-related-policies/

Buckley, P. J., Clegg, J., Cross, A. R., Liu, X., Voss, H., & Zheng, P. (2007). The determinants of Chinese outward foreign direct investment. Journal of International Business Studies, 38(4), 499-518.

Dağlıoğlu, D. (2022). The Role of Foreign Direct Investment in Startup Ecosystems. In Handbook of Research on Entrepreneurial Development and Innovation Within a Globalized World (pp. 1-19). IGI Global.

Driffield, N., & Love, J. H. (2007). Foreign Direct Investment, Technology Transfer, and the Economic Performance of the Transition Economies. Transition Studies Review, 13(2), 475-490.

Dunning, J. H. (2012). The Globalization of Business (Routledge Revivals): The Challenge of the 1990s. Routledge.

EUIPO. (2021). Managing intellectual property rights in innovation: The key to reaching the market. Retrieved from https://www.wipo.int/wipo_magazine/en/2021/01/article_0009.html

European Commission. (2005). The new SME definition: User guide and model declaration. Enterprise and Industry Publications.

FasterCapital. (n.d.). The biggest online incubator and accelerator. Provides work per equity and helps in raising capital from a large network of angel investors and VCs. -. FasterCapital. https://fastercapital.com/

Gaur, A. S., Ma, X., & Ding, Z. (2014). The impact of institutional distance on the international diversity–performance relationship. Strategic Management Journal, 35(3), 351-370.

Görg, H., & Greenaway, D. (2004). Much ado about nothing? Do domestic firms really benefit from foreign direct investment? The World Bank Research Observer, 19(2), 171-197.

Harrison, A., Rutherford, T. F., & Tarr, D. G. (2004). Economic implications for Turkey of a customs union with the European Union. World Bank Publications.

HBR. (2015). When culture doesn’t translate. https://hbr.org/2015/10/when-culture-doesnt-translate.

HubSpot. (2020). What is an incubator? A complete guide for startups. Retrieved from https://www.hubspot.com/startups/resources/what-is-an-incubator.

IMD. (2020). The localization of global supply chains amid the pandemic. Retrieved from https://www.imd.org/research-knowledge/supply-chain/articles/the-localization-of-global-supply-chains-amid-the-pandemic/

IMF. (2021). Geoeconomic fragmentation and foreign direct investment. In World Economic Outlook: Managing Divergent Recoveries (pp. 91-114). International Monetary Fund.

Investopedia. (2023). Management style. Retrieved from https://www.investopedia.com/terms/m/management-style.asp.

Isenberg, D. (2010). How to start an entrepreneurial revolution. https://en.wikipedia.org/wiki/Entrepreneurship_ecosystem

Ketchen et al. (2007). Best value supply chains: A key competitive weapon for the 21st century. Business Horizons.

Lall, S. (1983). The new multinationals: The spread of third world enterprises. Wiley.

Liguori, E., Bendickson, J., McDowell, W. C., & Davis, P. E. (2019). Measuring entrepreneurial ecosystems: A comprehensive approach. https://101entrepreneurship.org/entrepreneurial-ecosystem/

Lundan, S. M. (2018). The multinational enterprise as a small open economy. Journal of International Business Studies, 49(4), 487-497.

Luo, Y., & Tung, R. L. (2007). International expansion of emerging market enterprises: A springboard perspective. Journal of International Business Studies, 38(4), 481-498.

Maskus, K. E., & Penubarti, M. (1995). How trade-related are intellectual property rights? Journal of International Economics, 39(3-4), 227-248.

Mason, C., & Brown, R. (2014). Entrepreneurial ecosystems and growth-oriented entrepreneurship. https://www.cambridge.org/core/books/abs/entrepreneurial-ecosystems/introduction/8A67034490CBBFDEA6BBBD0EFC9BFFE4

Meyer, K. E., & Sinani, E. (2009). When and where does foreign direct investment generate positive spillovers? A meta-analysis. Journal of International Business Studies, 40(7), 1075-1094.

OECD. (2002). Foreign direct investment for development: Maximising benefits, minimising costs. OECD Publishing.

OECD. (2004). Knowledge diffusion from multinational enterprises. In OECD Science, Technology and Industry Outlook 2004 (pp. 203-209). OECD Publishing.

OECD. (2017). Enhancing the contributions of SMEs in a global and digitalised economy. OECD Publishing.

OECD. (2017). Entrepreneurial ecosystems. In OECD Science, Technology and Industry Scoreboard 2017: The digital transformation (pp. 120-121). OECD Publishing.

Ries, E. (2011). The lean startup: How today’s entrepreneurs use continuous innovation to create radically successful businesses. Crown Business.

Scribbr. (2020). What is cross-cultural competence? https://www.scribbr.com/methodology/cross-cultural-competence/

Smith, M. (2020). Foreign Direct Investment and Entrepreneurship: An Evolving Relationship. Routledge.

Stam, E., & Spigel, B. (2016). Entrepreneurial ecosystems. In Blackburn R., De Clercq D., Heinonen J., & Wang Z. (Eds.), Handbook for entrepreneurship and small business (pp. 407-422). SAGE Publications Ltd.

Stanley, M. (2019). Beyond the VC funding gap. https://www.morganstanley.com/ideas/venture-capital-funding-gap

UNCTAD. (2020). Neighbours with different innovation patterns: The implications of FDI policies for cross-border collaboration in innovation. In World Investment Report 2020: International Production Beyond the Pandemic (pp. 113-115). United Nations.

UNCTAD. (2020). World Investment Report 2020. United Nations. Wang, J., & Blomström, M. (1992). Foreign investment and technology transfer: A simple model. European Economic Review, 36(1), 137-155.

WIPO. (2021). What is intellectual property? https://www.wipo.int/about-ip/en/