Linking Inward Foreign Direct Investment to Innovative Entrepreneurship: The Mediating Role of Economic Institution in Chinese Regions

This study examined the influence of inward foreign direct investment (IFDI) on innovative entrepreneurship across 30 Chinese provinces and three regions (eastern, central and western). Using nine years of panel data (2010-2018) and a fixed-effects model, we demonstrate that economic institution is a pivotal link connecting IFDI and innovative entrepreneurship. Our findings reveal that marketization exerts a significant partial mediating effect in eastern China, but this mediating role is not evident in the central and western regions. These results underscore the importance of regional institutional development in maximizing the potential spillover effects of IFDI. To optimize these spillovers, China should adopt regionally differentiated strategies to enhance economic institutions, and foster the robust growth of domestic innovative entrepreneurship. This study contributes to the literature on the debate about IFDI and innovative entrepreneurship by highlighting the mediating role of economic institutions and providing policy insights for governments and enterprises.