The impact of multinational entry on domestic market structure and investment
We model the impact of different modes of multinational entry on the choices of domestic firms. Focusing on the competitive effects of foreign entry for the host country we demonstrate that greenfield investment will increase competition only if it is not countered by anti-competitive reactions on the part of the domestic firms. Together with cross-border mergers and acquisitions the model, thus, provides two alternative explanations for the increase in concentration ratios in industries with mostly horizontal foreign direct investment. Moreover, foreign presence is shown to raise total investment in the local industry at the cost of crowding out domestic investment.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- James R. Markusen, 1995. "The Boundaries of Multinational Enterprises and the Theory of International Trade," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 169-189, Spring.
- Alessandro Sembenelli & Georges Siotis, 2002.
"Foreign Direct Investment, Competitive Pressure and Spillovers. An Empirical Analysis on Spanish Firm Level Data,"
Development Working Papers
169, Centro Studi Luca d'Agliano, University of Milano.
- Sembenelli, Alessandro & Siotis, Georges, 2005. "Foreign Direct Investment, Competitive Pressure and Spillovers. An Empirical Analysis of Spanish Firm Level Data," CEPR Discussion Papers 4903, C.E.P.R. Discussion Papers.
- Eicher, Theo & Kang, Jong Woo, 2005. "Trade, foreign direct investment or acquisition: Optimal entry modes for multinationals," Journal of Development Economics, Elsevier, vol. 77(1), pages 207-228, June.
- Theo Eicher & Jong Woo Kang, 2004. "Trade, Foreign Direct Investment or Acquisition: Optimal Entry Modes for Multinationals," CESifo Working Paper Series 1174, CESifo Group Munich.
- Koen De Backer & Leo Sleuwaegen, 2003. "Does Foreign Direct Investment Crowd Out Domestic Entrepreneurship?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 22(1), pages 67-84, February.
- Koen De Backer & Leo Sleuwaegen, 2002. "Does foreign direct investment crowd out domestic entrepreneurship?," Vlerick Leuven Gent Management School Working Paper Series 2002-14, Vlerick Leuven Gent Management School.
- Glass, Amy Jocelyn & Saggi, Kamal, 2002. " Multinational Firms and Technology Transfer," Scandinavian Journal of Economics, Wiley Blackwell, vol. 104(4), pages 495-513, December.
- Glass, Amy Jocelyn & Saggi, Kamal, 1999. "Multinational firms and technology transfer," Policy Research Working Paper Series 2067, The World Bank.
- Jan Boone, 2000. "Competitive Pressure: The Effects on Investments in Product and Process Innovation," RAND Journal of Economics, The RAND Corporation, vol. 31(3), pages 549-569, Autumn.
- Boone, J., 2000. "Competitive pressure : The effects on investments in product and process innovation," Other publications TiSEM 88418185-7603-4c36-92fd-3, Tilburg University, School of Economics and Management.
- Horn, Henrik & Persson, Lars, 2001. "The equilibrium ownership of an international oligopoly," Journal of International Economics, Elsevier, vol. 53(2), pages 307-333, April.
- Horn, Henrik & Persson, Lars, 1999. "The Equilibrium Ownership of an International Oligopoly," CEPR Discussion Papers 2302, C.E.P.R. Discussion Papers.
- Horn, Henrik & Persson, Lars, 1999. "The Equilibrium Ownership of an International Oligopoly," Working Paper Series 515, Research Institute of Industrial Economics.
- Wang, Jian-Ye & Blomstrom, Magnus, 1992. "Foreign investment and technology transfer : A simple model," European Economic Review, Elsevier, vol. 36(1), pages 137-155, January.
- Magnus Blomstrom & Jian-Ye Wang, 1989. "Foreign Investment and Technology Transfer: A Simple Model," NBER Working Papers 2958, National Bureau of Economic Research, Inc.
- Bjorvatn, Kjetil, 2004. "Economic integration and the profitability of cross-border mergers and acquisitions," European Economic Review, Elsevier, vol. 48(6), pages 1211-1226, December.
- J. Peter Neary, 2007. "Cross-Border Mergers as Instruments of Comparative Advantage," Review of Economic Studies, Oxford University Press, vol. 74(4), pages 1229-1257.
- Neary, J Peter, 2004. "Cross-Border Mergers as Instruments of Comparative Advantage," CEPR Discussion Papers 4325, C.E.P.R. Discussion Papers.
- J. Peter Neary, 2004. "Cross-border mergers as instruments of comparative advantage," Working Papers 200404, School of Economics, University College Dublin.
- Neary, J. Peter, 2004. "Cross-Border Mergers as Instruments of Comparative Advantage," Center for European, Governance and Economic Development Research Discussion Papers 34, University of Goettingen, Department of Economics.
- Horstmann, Ignatius J. & Markusen, James R., 1992. "Endogenous market structures in international trade (natura facit saltum)," Journal of International Economics, Elsevier, vol. 32(1-2), pages 109-129, February.
- Mattoo, Aaditya & Olarreaga, Marcelo & Saggi, Kamal, 2004. "Mode of foreign entry, technology transfer, and FDI policy," Journal of Development Economics, Elsevier, vol. 75(1), pages 95-111, October.
- Mattoo, Aaditya & Olarreaga, Marcelo & Saggi, Kamal, 2001. "Mode of Foreign Entry, Technology Transfer, and FDI Policy," CEPR Discussion Papers 2870, C.E.P.R. Discussion Papers.
- Driffield, Nigel, 2001. "The Impact of Domestic Productivity of Inward Investment in the UK," Manchester School, University of Manchester, vol. 69(1), pages 103-119, January.
- Ann E. Harrison & Brian J. Aitken, 1999. "Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela," American Economic Review, American Economic Association, vol. 89(3), pages 605-618, June.
- Peter J Buckley & Mark C Casson, 1998. "Analyzing Foreign Market Entry Strategies: Extending the Internalization Approach," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 29(3), pages 539-561, September.
- Nocke, Volker & Yeaple, Stephen, 2007. "Cross-border mergers and acquisitions vs. greenfield foreign direct investment: The role of firm heterogeneity," Journal of International Economics, Elsevier, vol. 72(2), pages 336-365, July.
- Stephen W. Salant & Sheldon Switzer & Robert J. Reynolds, 1983. "Losses From Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, Oxford University Press, vol. 98(2), pages 185-199. Full references (including those not matched with items on IDEAS)