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Entrepreneurship is a vital component of economic development through innovation, job creation and efficient allocation of resources. Hence, many governments play a proactive role in facilitating entry of new firms and nourishing an entrepreneurial culture. These objectives became more relevant in recent years since fostering entrepreneurship is viewed as the cure to the global economic slowdown. This thesis addresses an essential but neglected aspect of entrepreneurship development: the impact of capital flows in the form of FDI and foreign aid on domestic firm creation. What is common to FDI and aid is that capital, skills, technological and organizational know-how move across national boundaries, altering the balance of local resources available to prospective entrepreneurs. In Chapter 2, we exploit cross-country and cross-country-industry variation over time in FDI via M&A and entrepreneurship. Results suggest that adverse effects of FDI counterbalance positive spillovers, leaving the net impact on entrepreneurship negative—though it is economically very small—both at the aggregate and industry level. Nascent entrepreneurship is affected the most by FDI, with the size of the negative effect decreasing as new firms advance in age. In the literature, heightened competition ensuing FDI is documented as the main cause of crowding-out of domestic firms. Chapter 3 thus takes a step towards understanding factors governing the FDI-entrepreneurship nexus of which we consider industry competition (concentration) and wages. We find that FDI is positively associated with both elements in Dutch manufacturing industries, which translates into increases and reductions in entry rates, respectively. This suggests that lucrative rents in concentrated markets are accessible to both foreign and domestic firms. Findings also imply that higher industry wages attract would-be entrepreneurs into wage-employment rather than pursuing a career as a new venture owner. Once the channel effects are isolated, there is no direct ...

During the 1970s and 1980s, developing countries, skeptical of foreign investment, imposed several barriers on entry of foreign capital. However, the late 1980s and 1990s marked the onset of globalization, which integrated the whole world into a single global economy. The once-conservative developing nations, realizing the multifarious benefits of foreign direct investment (FDI), began encouraging entry of foreign firms, using various incentives, such as tax holidays, production subsidies, cash grants, labor training grants, and import duty exemptions. Gradually, FDI and foreign aid became two very important sources of foreign capital for these capital-constrained economies. This dissertation is focused on studying if there is any kind of relationship between foreign aid and private investment in recipient countries. FDI is a decision made by foreign investors on the basis of profitability of investment, whereas foreign aid is a political decision made by governments of donor countries on the basis of need for financial assistance by developing countries. We model foreign aid as an exogenous factor in allocation of foreign direct investment, along with other variables, to estimate the effect of aid on investment. Among the factors affecting FDI, infrastructure is considered to be an important one, in allocation of funds across developing countries. This dissertation is arranged as follows. In chapter 2, we introduce the term ``socioeconomic'' infrastructure and create an index, by combining several components of infrastructure, using the multivariate technique of principal components. Prior to creating the index, we employ the technique of multiple imputation to deal with missing data. Our measure of socioeconomic infrastructure contains elements of physical infrastructure, such as transportation facilities, telecommunication facilities, consumption demand for energy and electricity, as well as social infrastructure components, such as voice and accountability, political stability and the absence of violence and terrorism, rule of law, control of corruption, government effectiveness, and regulatory quality. In chapter 3, we develop a theoretical model to address the research question: Does foreign aid impede or encourage foreign direct investment in developing nations? Our theory demonstrates that foreign aid used by the recipient country in financing a public input (known as development aid) encourages foreign direct investment. We also empirically address the same issue by modeling foreign aid as a determinant of foreign direct investment, along with a host of other factors, including our computed index of socioeconomic infrastructure. Our analysis shows that public consumption aid (foreign aid used for financing consumption expenses) does crowd out private investment in current account surplus developing countries, whereas development aid crowds in private investment in the presence of sound macroeconomic, political, legal, and administrative machineries. In chapter 4, we build a panel econometric model to explain the factors underlying socioeconomic infrastructure in developing countries. Our results indicate that countries with higher per capita income, a prominently large government, high investment demand, and large government revenue tend to have better infrastructure.

Annotation As China continues to be heralded as a rising economic power, the need for an understanding of its institutional effects--such as investment-related policies, regulations, and laws--on foreign direct investment increases as well. Institutions and Investmentsemploys interdisciplinary perspectives from economics, business, law, and political science to shed light on the interaction between institutional changes and investment patterns and to form a clear picture of investment behavior as China's legal and regulatory infrastructure has developed over the reform years.Organized into three main parts, the book first discusses the evolution and nature of China's FDI regulatory framework. Part 2 examines the various modes and variant patterns of FDI in China in the reform years. Part 3's central task is to demonstrate a systematic link between institutional changes in China's FDI regulatory framework and the changing patterns of FDI. In conclusion, Jun Fu finds that China has made substantial progress from a command economy to a market system, but that it still has a long way to go before it truly attains a transparent and rule-based system. This book adds new dimensions to the scholarship on China as a growing economic power and will be of particular interest to international economists, political scientists, and business scholars studying China. Jun Fu is Associate Professor in the School of Economics and Management, Tsinghua University

Contents: The reparations problem and the Bank for international settlements, by L. T. McFadden; International financial co-öperation as a factor in world peace, by Virgil Jordan; Benefits and dangers of foreign investments, by F. C. James.

This paper provides insights to inform government efforts to attract and retain foreign direct investment, by analyzing the results of a survey of more than 2,400 affiliates of multinational enterprises across 10 middle-income countries. The paper explores corporate perspectives and decision-making on countries' legal and regulatory environments, political risk, and investment promotion activities. The survey finds that a business-friendly policy environment is critical to multinational enterprises' investment decisions, confirming the importance of removing regulatory barriers to foreign direct investment (particularly approval processes), lowering political risks, and having investment promotion agencies. The survey results also show that investors are heterogeneous, with affiliates' sectors, trading behaviors, sizes, ages, source countries, and foreign ownership levels affecting their perceptions of and sensitivity to various policy factors. Thus, policy makers should tailor their policy efforts to the needs of priority investor segments. Notably, the analysis consistently finds variation based on the extent to which affiliates import their inputs, suggesting that this relatively understudied topic deserves increased research and policy attention.

Contents: Government foreign loans, by Max Winkler; A foreign policy to match our foreign investments, by E. M. Patterson; Foreign investments and imperialism, by Robert Dunn; Some overlooked dangers in foreign investments, by F. C. Howe.

This paper analyses real Gross Domestic Product (GDP), Domestic Investment (DI), Foreign Direct Investment (FDI), Domestic Savings (DS) and Trade (TR) in Rwanda for the period 1970 to 2011. GDP and DI have an upward trend and annual growth of real GDP was around 8% in average for all period. FDI and DS have remained below 2% of GDP each and trade balance of Rwanda is always negative. Augmented Dickey-Fuller (ADF) tests show that GDP, DI and FDI are not stationary at the level but the first differences are stationary. VAR (1) was identified as the appropriate model according to Akaike information criterion, Schwarz information criterion and Hannan-Quinn information criterion. Granger causality tests show that there is bi-directional causality between GDP and TR and TR and DI and unidirectional causality from GDP to DI, from DS to GDP, from DS to DI and from DS to TR. These findings show that GDP can be used to promote Domestic Investment and Trade. Domestic savings have significant effects on GDP, DI and TR. VAR was estimated and the forecasted values of GDP, DI and FDI in 2011 are respectively, 3,843.6233 million, 22.67% and 0.95% while their actual values in 2011 are 3891.9million, 22.7% and 1.66%. There is under-prediction for GDP, DI and FDI. The differences can be explained by the efforts of the Government of Rwanda to promote GDP, Domestic Investment and Foreign Direct Investment.