The relationship between the presence of foreign-owned companies and entrepreneurial activity: The case of the Hungarian districts

This study investigates the relationship between the presence of foreign-owned companies and the rates of new firm entries in Hungarian districts. Building on previous findings on the relationship between new firms and foreign direct investment, we seek to analyse the role of foreign-owned companies in entrepreneurial activity at the sub-regional level. Using a panel dataset from 2011 to 2019, we investigate the relationship between changes in employment within foreign-owned companies and the firm entry rate in various districts. The results indicate a negative relationship between the presence of foreign-owned companies and the overall rates of firm entry. This trend is also observed in the manufacturing sectors, although with less significance. In those districts where the presence of foreign-owned companies is lower, the rates of new firm entries are higher. Furthermore, the negative relationship between foreign-owned companies and general firm entry rates may persist even with time lags. Therefore, there may be a trade-off between employment at a foreign-owned company and pursuing entrepreneurship.