Survival and Growth Strategies on Europe’s Geographical Periphery
Edited by Helena Lenihan, Bernadette Andreosso-O’Callaghan and Mark Hart
Chapter 8: Entrepreneurship and Inward Foreign Direct Investment in Portugal
1 Natália Barbosa and Vasco Eiriz INTRODUCTION Over the past decades governments across the world, both in developing and developed countries have identified foreign direct investment (FDI) as a key factor of their national development strategies, designing policies and incentives that increasingly facilitate the location of multinational enterprises (MNEs) in their territories. The rationale for this is based on the argument that MNEs can be influential to the host economy by assisting and promoting local entrepreneurial activity and industrial restructuring. The entry or presence of MNEs is thought to provoke a positive effect on local entry and post-entry performance in terms of survival and growth of new enterprises by increasing demand for intermediate inputs and, hence, by yielding pecuniary spillovers. Rivera-Batiz and Rivera-Batiz (1990), Rodríguez-Clare (1996), Markusen and Venables (1999), and Barrios et al. (2005) provided theoretical treatments of the main mechanisms by which MNEs may uphold the development of local enterprises and industries. This chapter analyses empirically whether MNEs operating in Portugal have a positive and important effect on local entrepreneurial activity. The relationship between MNEs and the creation of new local enterprises is investigated in context of both manufacturing and services industries and for different groups of industries (classified according to Pavitt, 1984) and small- and medium-sized enterprises (SMEs). The Portuguese economy provides an interesting context for such an analysis given that over the past decades, after Portugal’s entry into the European Union (EU) in 1986, the expected positive effects of FDI on local development were...
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