The Importance of FDI on Stimulating Entrepreneurship – A Regional Study in the Case of Romania

Abstract

The world economy has been developing at a very fast pace for the past few decades, growth which is commonly linked to the development of technology. Innovative ideas become successful when certain individuals decide to face the multiple risks that appear when transforming these ideas in to reality. The vast literature on entrepreneurship has shown that startups are important players in driving the economy on an ascending path. It is no surprise that highly developed countries, such as USA, Israel or Singapore have governmental programs which stimulate startup creation. More recently, the Romanian government has also joined in on spending money to offer entrepreneurs the chance to create successful businesses. Using spatial panel data on the 41 counties of Romania and the capital, Bucharest, on the period 2011-2016, this study highlights some significant dependencies between the survival of startups (for a period of 3 years) and other factors – both internal and external. The analysis shows that the aforementioned survival is clearly and positively impacted by Foreign Direct Investment, the share of fresh businesses in the total business environment and the number of immigrants with a permanent residence in the respective counties. Moreover, there are significant spatial effects occurring between neighboring counties. These results suggest that foreign investors could benefit from bringing their capital in Romania, as startups greatly contribute to the specialization of markets, and moreover, spillover effects present suggest that a smaller number of investment centers can be highly effective in their regions.

If the inline PDF is not rendering correctly, you can download the PDF file here.

  • Albulescu, C., & Tamasila, M. (2014). The impact of FDI on entrepreneurship in the European Countries. Procedia - Social and Behavioral Sciences 124, 219-228.

  • Anselin, L. (2003). An Introduction to Spatial Autocorrelation Analysis with GeoDa. Chicago.

  • Baltagi, B. H., Song, S. H., & Koh, W. (2003). Testing panel data regression models with spatial error correlation. Journal of Econometrics, 123-150.

  • Baumol, W., Panzar, J., & Willig, R. (1988). Contestable markets and the theory of industry structure, revised edition. San Diego: Harcourt Brace Jovanovich.

  • Berry WD, F. S. (1985). Multiple Regression in Practice (Quantitative Applications in the Social Sciences). SAGE Publications.

  • Borensztein, E., De Gregorio, J., & Lee, J.-W. (1998). How does foreign direct investment affect economic growth? Journal of International Economics, 115-135.

  • Elhorst, J. P. (2014). Spatial Econometrics - From Cross-Sectional Data to Spatial Panels. Springer.

  • Espinoza, C., Mardones, C., Saez, K., & Catalan, P. (2019). Entrepreneurship and regional dynamics: the case of Chile. Entrepreneurship & Regional Development.

  • Fahed, W. (2013). The Effect of Entrepreneurship on Foreign Direct Investment. International Journal of Economics and Management Engineering Vol 7 No 6, 1346-1358.

  • Fritsch, M. (2008). How does new business formation affect regional development? Introduction to the special issue. Small Business Economics, 245-260.

  • Fritsch, M., & Mueller, P. (2007). The effect of new business formation on regional development over time: The case of Germany. Small Business Economics.

  • GEM. (2015-2016). Global Report.

  • GEM. (2018-2019). Global Report.

  • Ghani, E., Kerr, W., & O’Connell, S. (2014). Spatial Determinants of Entrepreneurship in India. Regional Studies 48, no. 6, 1071-1089.

  • Kalantaridis, C., & Bika, Z. (2006). In-Migrant Entrepreneurship in Rural England: Beyond Local Embeddedness. Entrepreneurship & Regional Development 18, 109-131.

  • Kalyanasundaram, G. (2018). Why Do Startups Fail? A Case Study Based Empirical Analysis In Bangalore. Asian Journal of Innovation and Policy, 79-102.

  • Kerr, W., Nanda, R., & Rhodes-Kropf, M. (2014). Entrepreneurship as Experimentation. Journal of Economic Perspectives - Volume 28, Number 3, 25-48.

  • Khelil, N. (2015). The many faces of entrepreneurial failure: Insights from an empirical taxonomy. Journal of Business Venturing, 72-94.

  • Kim, W., & Mauborgne, R. (2004). Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant. Boston: Harvard Business School Press.

  • Klepper, S., & Sleeper, S. (2005). Entry by spinoffs. Management Science, 1291-1306.

  • Koster, S., van Stel, A., & Folkeringa, M. (2010). Start-ups as drivers of market mobility: An analysis at the region-sector level for the Netherlands. Scientific Analysis of Entrepreneurship and SMEs.

  • LeSage, J., & Pace, R. K. (2009). Introduction to Spatial Economentrics. Boca Raton: CRC Press.

  • Millo, G., & Piras, G. (2012). splm: Spatial Panel Data Models in R. Journal of Statistical Software.

  • Nanda, R., & Rhodes-Kropf, M. (2017). Innovation Policies. Working Paper 13-038 Harvard Business School.

  • Okrah, J., Nepp, A., & Agbozo, E. (2018). Exploring the Factors of Startup Success and Growth. The Business and Management Review, Volume 9, Number 3, 229-237.

  • OUG-3. (2017, January). Emergency ordinance for stimulating the creation of new small and medium enterprises. Preluat de pe gov.ro: http://sgg.gov.ro/new/wp-content/uploads/2017/01/OUG-3.pdf

  • Pace, R. k., & LeSage, J. P. (2008). A spatial Hausman test. Economics Letters, 282-284.

  • Ross, A. (2011). Regional Determinants of Entrepreneurship in a Small Economy: Panel Data Evidence from Scotland. The European Regional Science Association.

  • Silva, D., Cerqueria, A., & Brandao, E. (2016). Portugese Startups: a success prediction model. FEP Working Papers.

  • Valliere, D., & Peterson, R. (2009). Entrepreneurship and economic growth: Evidence from emerging and developed countries. Entrepreneurship & Regional Development, 459-480.

  • Zamfir, C. (2017, December 15). Start-Up Nation 2018: How many firms could be financed by a new programme. Preluat de pe Startup Cafe: https://www.startupcafe.ro/finantari/start-nation-2018-firme.html

OPEN ACCESS

Journal + Issues

Search