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Foreign Presence and Market Concentration: The Case of Portuguese Manufacturing Industries

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Author Info

  • Rosa Forte

    ()
    (CEF.UP, Faculdade de Economia, Universidade do Porto)

  • Paula Sarmento

    ()
    (CEF.UP, Faculdade de Economia, Universidade do Porto)

Abstract

The impact of foreign direct investment (FDI) on host country market concentration has been a controversial issue, both at the theoretical and the empirical levels. Most existing empirical studies point to a positive relationship, enhancing the negative effects of FDI on competition conditions, but there are also studies that support the argument that FDI reinforces competition. In this paper we analyze the impact of FDI on market concentration considering the Portuguese manufacturing industries in the period 2006-2009. Using panel data estimation we found a significant negative impact of FDI on industry concentration, which is in line with the results of other studies for developed countries, and gives support to arguments that FDI has positive effects on domestic firms, eventually through positive externalities.

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Bibliographic Info

Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series FEP Working Papers with number 444.

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Length: 19 pages
Date of creation: Feb 2012
Date of revision:
Handle: RePEc:por:fepwps:444

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Related research

Keywords: Foreign Direct Investment; Market Concentration; Panel Data;

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References

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  1. Koen De Backer & Leo Sleuwaegen, 2003. "Does Foreign Direct Investment Crowd Out Domestic Entrepreneurship?," Review of Industrial Organization, Springer, Springer, vol. 22(1), pages 67-84, February.
  2. Jeffrey M. Wooldridge, 2001. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262232197, December.
  3. Sanjaya Lall, 1979. "Multinationals and market structure in an open developing economy: The case of Malaysia," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 115(2), pages 325-350, June.
  4. Willmore, Larry, 1989. "Determinants of industrial structure: A Brazilian case study," World Development, Elsevier, vol. 17(10), pages 1601-1617, October.
  5. BARRIOS, Salvador & GOERG, Holger & STROBL, Eric, 2004. "Foreign direct investment, competition and industrial development in the host country," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 2004011, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. Roger Bandick, 2010. "Multinationals and plant survival," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 146(4), pages 609-634, December.
  7. Haller, Stefanie A., 2009. "The impact of multinational entry on domestic market structure and investment," International Review of Economics & Finance, Elsevier, Elsevier, vol. 18(1), pages 52-62, January.
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Cited by:
  1. Rosa Forte, 2013. "Multinational Firms And Host Country Market Structure: A Review Of Empirical Literature," FEP Working Papers 497, Universidade do Porto, Faculdade de Economia do Porto.

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