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Hymer's multinationals

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  • de Blas, Beatriz
  • Russ, Katheryn Niles

Abstract

Stephen Hymer (1960, 1976) argues that a desire to increase market power is a strong motive for foreign takeovers. Yet the market-power motive for FDI flows has been largely unexplored in the modern theory of heterogeneous firms. This paper shows that foreign direct investment can increase markups under Bertrand competition when firms are heterogeneous, even when no strategic motive is possible. It then outlines two cases arising purely due to trade barriers in which a desire to increase markups in either the source or host country can compel a firm to set up a foreign affiliate, identifying a Hymer–Neary effect in the process.

Suggested Citation

  • de Blas, Beatriz & Russ, Katheryn Niles, 2013. "Hymer's multinationals," Journal of Economic Behavior & Organization, Elsevier, vol. 94(C), pages 381-392.
    • Handle: RePEc:eee:jeborg:v:94:y:2013:i:c:p:381-392
    DOI: 10.1016/j.jebo.2012.11.001
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    Cited by:

    1. Cao, Qingqing & Minetti, Raoul & Olivero, Maria, 2018. "No Pain, No Gain. Multinational Banks in the Business Cycle," School of Economics Working Paper Series 2018-6, LeBow College of Business, Drexel University.
    2. Qingqing Cao, 2018. "No Pain, No Gain. Multinational Banks in the Business Cycle," 2018 Meeting Papers 1059, Society for Economic Dynamics.
    3. Yang, Chih-Hai, 2023. "Competition in the Chinese market: Foreign firms and markups," Journal of the Japanese and International Economies, Elsevier, vol. 67(C).

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    More about this item

    Keywords

    Multinational firm; Heterogeneous firms; Endogenous markup;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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