Foreign direct investment: technology-based entrepreneurship and the role of institutions

Purpose This study empirically investigates the moderating effect of institutions (including formal institutions and informal institutions) on the relationship between FDI and regional technology-based entrepreneurship in China’s emerging economy. Design/methodology/approach By collecting data on technology-based entrepreneurship at the regional level in China, our final balanced panel comprises 81,926 technology start-ups in 29 provinces at the regional level from 2000 to 2014. Findings The results show that FDI is critical to encouraging technology-based start-ups. We also argue that the institutions positively moderate the relationship between FDI and regional technology-based entrepreneurship. This study supports the negative interaction effect of FDI and corruption on technology-based entrepreneurship in eastern regions, suggesting that corruption weakens FDI’s entrepreneurial enthusiasm. Originality/value This study contributes to the literature by highlighting the critical role of regional formal institutions in moderating the positive effects of FDI on technology-based entrepreneurship. This enriches the knowledge spillover theory of entrepreneurship and the OLI paradigm, offering a fresh perspective on this complex relationship. Additionally, it provides nuanced insights into how corruption, as an informal institution, interacts with FDI in different regional contexts.