The Impact of FDI on Entrepreneurship in European Countries: Mechanism and Strength

Abstract

The role of foreign direct investment (FDI) in promoting entrepreneurship has attracted increasing attention from academics and policymakers. However, empirical research has failed to consider model uncertainty, leading to contradictory results. This study designs a new semi-parametric path approach to identify the mechanism and strength of FDIs’ impact on entrepreneurial activities through three levels of difference: the general, time, and country. Our results indicate that a conflicting relationship may occur between FDIs and entrepreneurial activity because the opposing influences at these three levels negate them. Nevertheless, our detailed results are important for guiding business organizations not only among the European Union, but also in specific European countries.