Abstract
Using World Bank Enterprise Survey data around the world, this paper examines how foreign direct investment is associated with female entrepreneurship (that is, a firm being managed and at least partly owned by women), along with other factors such as business environment and female empowerment, and their interactions with foreign direct investment. Female entrepreneurship rises with foreign direct investment inflow, lower entry barriers for women, women's better access to finance, higher female labor force participation, and women's better education. The positive association of foreign direct investment inflow and female entrepreneurship is stronger for firms in the service sectors and small firms. The horizontal competition effects of intra-industry foreign direct investment for female entrepreneurship are reduced when women face lower entry barriers for starting a business and have a higher labor force participation rate, and the effects do not depend on women's access to finance or their level of education.
Highlights
We focus on the determinants of female leadership in businesses, and in particular, the role played by foreign direct investment (FDI), around the world
We find that female entrepreneurship varies greatly across countries
FDI is positively associated with female entrepreneurship
Summary
The past decades have witnessed remarkable progresses for women on most fronts. According to the World Development Indicators for 187 countries (World Bank, 2019), while the labor participation rate for males has declined from 76.2 percent in 1990 to 72.3 percent in 2018, that for females has increased from 48.5 to 51.8 percent. The horizontal competition effects of intra-industry FDI for female entrepreneurship is reduced when women face lower entry barriers for starting businesses and have higher labor participation rate, and do not depend on women’s access to finance and their education level. We expect on more negative intra-industry FDI effects (due to horizontal competition) for women’s entrepreneurship in countries with stronger barriers such as higher entry barriers and worse access to finance for women entrepreneurs. We call this the FDI competition and resource bias hypothesis. It would reduce our concern for the omitted variable bias if our estimate of the effect of FFcccc is similar for specifications 1 and 2
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