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The impact of FDI and domestic business climate on local entrepreneurship in Transcaucasia: A case of Georgia in the years 2005 – 2015


The main objective of this paper is to examine the impact of FDI inflow on local entrepreneurship in Georgia. The secondary objective of the article is to determine what effects the business climate in the country has on the growth of local entrepreneurs. To verify the impact of foreign investments on domestic entrepreneurship, dynamics of active local enterprises in Georgia in the years 2005-2014 is used as a dependent variable. In regard with business climate, international business and credit rankings were selected to show how they are interrelated with foreign investments and how they affect domestic entrepreneurs. FDI has no significant effect on local entrepreneurship in Georgia, neither on their growth, nor on their fall, as Its share in the local economy is nominal. It is noteworthy, however, that inflow of foreign capital has positive impact on the country’s business climate, promoting its image and rising international recognition. The favorable business climate can help many local enterprises, especially SMEs, to benefit from liberal environment, financial and tax incentives, less regulation and bureaucracy. This paper intends to enrich relatively poor literature about FDI effects on Transcaucasian countries, providing a clear understanding to what extend the local entrepreneurship are under the influence of FDI and general business climate in the country.


FDI, entrepreneurship, business climate, Transcaucasia, Georgia



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