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Does FDI increase market concentration? An evaluation of the Portuguese manufacturing industries

Author

Listed:
  • Rosa Forte

    (University of Porto, International Business at the Faculty of Economics, Porto, Portugal)

  • Paula Sarmento

    (University of Porto, Faculty of Economics, Porto, Portugal)

Abstract

We analyse the impact of FDI on market concentration for the Portuguese manufacturing industries in the 2006–2009 period. Using panel data estimation, and after controlling for other determinants of industry concentration (entry barriers, market size, and growth), we found a significant negative impact of FDI on industry concentration. This finding is in line with the results of the empirical literature on other developed countries. Moreover, it supports the argument that FDI has positive effects on domestic firms, eventually through positive externalities, and contradicts the widespread view that in small economies FDI increases concentration. Overall, this study adds to the controversial literature on FDI and concentration, and it is the first study on this topic applied to Portugal.

Suggested Citation

  • Rosa Forte & Paula Sarmento, 2014. "Does FDI increase market concentration? An evaluation of the Portuguese manufacturing industries," Acta Oeconomica, Akadémiai Kiadó, Hungary, vol. 64(4), pages 463-480, December.
    • Handle: RePEc:aka:aoecon:v:64:y:2014:i:4:p:463-480
    Note: The authors gratefully acknowledge Natércia Fortuna and Anabela Carneiro’s comments and suggestions about econometric estimation and Alberto Neto’s contribution for starting the literature research on the paper’s topic. We also thank the participants of two international conferences who contributed interesting comments and assisted us in clarifying and finalising a working paper that was the basis of the present article. This research has been financed by the Portuguese Public Funds through Fundação para a Ciência e Tecnologia (FCT) in the framework of the project PEst-OE/EGE/UI4105/2014.
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    Citations

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    Cited by:

    1. Dahlia Nauly & Harianto Harianto & Sri Hartoyo & Tanti Novianti, 2020. "Foreign Presence and Indonesian Food Industry Performance," International Journal of Economics and Financial Issues, Econjournals, vol. 10(2), pages 48-52.
    2. Aurora A. C. Teixeira & Ana Sofia Loureiro, 2019. "FDI, income inequality and poverty: a time series analysis of Portugal, 1973–2016," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 18(3), pages 203-249, October.

    More about this item

    Keywords

    foreign direct investment; market concentration; panel data; Portugal;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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