International financial integration and entrepreneurial firm activity
By: Laura Alfaro, Andrew Charlton.
Contributors: Charlton, Andrew 1978-; National Bureau of Economic Research.
Series: NBER working paper series -- no. 13118.; Working paper series (National Bureau of Economic Research) -- working paper no. 13118.
Publisher: National Bureau of Economic Research
Published: 2007
Place of publication: Cambridge, Mass
Language: eng
Number of pages: 29
Subjects: Investments, Foreign; Entrepreneurship -- Econometric models; Economic development
Description: "We explore the relation between international financial integration and the level of entrepreneurial activity in a country. We use a unique firm level data set of approximately 24 million firms in nearly 100 countries in 2004 and 1999, which enables us to present both cross-country and industry level evidence. We establish robust cross-country correlations between increased international financial integration and the activity of entrepreneurs using various proxies for entrepreneurial activity such as entry, size, and skewness of the firm-size distribution and de jure and de facto measures of international capital integration. We then explore causal channels through which foreign capital may encourage entrepreneurship. We find evidence that entrepreneurial activity in industries which are more reliant on external finance is disproportionately affected by international financial integration, suggesting that foreign capital may improve access to capital either directly or through improved domestic financial intermediation. Second we find that entrepreneurial activity is higher in industries which have a large share of foreign firms or in vertically linked industries."
Notes: "May 2007"

Includes bibliographical references (p. 26-29).

Also available in PDF from the NBER world wide web site (www.nber.org).