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The moderating role of education in the relationship between FDI and entrepreneurial activity

  • Jenny Berrill
  • Martha O’Hagan-Luff
  • André van StelEmail author
Article
  • 62 Downloads

Abstract

We investigate the roles of inward FDI and education in explaining country levels of entrepreneurship. It is widely recognised that inward FDI may have positive but also negative spillover effects on entrepreneurial activity. We argue that both types of spillovers (positive and negative) may be reinforced by high education levels of the labour force. Using a database across 75 countries between 2001 and 2015, we estimate a 2SLS model that tests for this moderating role of education. We find support for a negative interaction effect of FDI and macro-level education on the rate of entrepreneurial activity, suggesting that in countries with highly educated labour forces, inward FDI leads to more jobs in the wage sector rather than a higher number of entrepreneurs. Policy implications are discussed.

Keywords

Entrepreneurial activity Inward FDI Spillover effects Education 

JEL codes

F21 F23 I21 L26 

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Authors and Affiliations

  1. 1.Trinity Business SchoolTrinity College DublinDublin 2Ireland
  2. 2.Kozminski UniversityWarsawPoland

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