Date of Award
Doctor of Philosophy (PhD)
Dr. Alberto Davila
Dr. Linda McCallister
Dr. Jose A. Pagan
Mexico's economic crisis of the early 1980s eventually led this country to adopt a new economic strategy. Mexico has opted for an export-based development strategy where governmental policies focus on creating an environment attractive to foreign investors. These policies have succeeded in attracting foreign direct investment to Mexico in record levels since 1987, predominately to the U.S.-Mexico border region. I argue in this dissertation, however, that these FDI flows have impeded small business growth and entrepreneurial drive along Mexico's northern border.
I discuss three alternative explanations for this phenomenon. First, FDI flows may not have created sufficient linkages with the domestic economy through the small business sector. Alternatively, expansion of large-scale industry along the border may have followed an unbalanced growth path inhibiting development of the region's small business sector by altering labor market employment and wage structures. If small-firm wages (relative to large firms) increased, as suggested by empirical analysis, then the costs associated with operating a small business along the border might have increased. Finally, FDI-led industrial development presumably created employment opportunities in the wage and salary sector that perhaps are influencing entrepreneurial drive in the U.S.-Mexico border region.
If FDI flows to industry along the border actually impede the economic development of the small-business sector there, then programs aimed at promoting small business growth along the border should be considered. More generally, a thorough understanding of the relationship between FDI and small business formation could enhance the formulation of policy aiming to foster the economic development of less developed countries by means of FDI. Clearly, then, understanding the interrelationships among FDI, small business formation, and employment helps policymakers to integrate the role of the small enterprise into national economic development plans.
University of Texas-Pan American