Small Business Economics

, Volume 48, Issue 3, pp 613–631 | Cite as

Does foreign direct investment stimulate new firm creation? In search of spillovers through industrial and geographical linkages



This paper examines the spillover effects of inward foreign direct investment (FDI) on the entrepreneurial activities of new firm creation through both industrial and geographical linkages. Using a dataset of 44,434 newly created small firms in 234 regions of South Korea in 2000–2004, this study finds that while the spillover impacts of FDI in the low-tech industry are positive and significant across almost all four possible combinations of the intra-/inter-regional and intra-/inter-sectoral channels, the impacts in the high-tech industry are largely intra-sectoral within the host region and across neighboring regions. Moreover, all statistically significant spillover effects follow an inverted ‘U’-shaped curvilinear trend.


Inward foreign direct investment New firm creation Entrepreneurship Sectoral and spatial analysis 

JEL Classifications

F23 L26 M13 R12 


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Copyright information

© Springer Science+Business Media New York 2016

Authors and Affiliations

  1. 1.Department of Geographical SciencesUniversity of MarylandCollege ParkUSA
  2. 2.Department of Management, Quinlan School of BusinessLoyola University ChicagoChicagoUSA
  3. 3.School of Finance and ManagementSOAS University of LondonLondonUK
  4. 4.International Institute for Applied System Analysis (IIASA)LaxenburgAustria

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