The Impact of Foreign Direct Investment on Entrepreneurship in Selected East Asian Countries During the Period 2014–2024

Abstract

This study investigates the impact of Foreign Direct Investment (FDI) on entrepreneurship in selected East Asian countries (China, Japan, Mongolia, and South Korea) over the period 2014 to 2024. The research method employed is the Generalized Method of Moments (GMM), and the data were analyzed using EViews software. The results of the dynamic panel model indicate that entrepreneurship has a dynamic nature and strong temporal dependence, such that the level of entrepreneurship in the previous period significantly influences entrepreneurial activities in the current period. FDI has a coefficient of -0.34. The negative sign of this coefficient suggests that an increase in FDI inflows during the study period has been associated with a relative decline in domestic entrepreneurship levels. The economic growth variable has a coefficient of 0.48 and is statistically highly significant, playing a considerable role in strengthening entrepreneurship; an increase in the size of the economy leads to the expansion of innovative activities and business development. In contrast, the inflation coefficient is -0.12. The negative sign of this coefficient indicates that a rise in inflation has an adverse effect on entrepreneurship. Inflation, through increasing economic uncertainty, reducing purchasing power, and raising production costs, can weaken the incentives for investment and entrepreneurial activities.