The impact of multinational entry on domestic market structure and investment |
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| Authors: | Stefanie A Haller |
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| Institution: | 1. Neuroimmunology and Neuromuscular Disorders Unit, Foundation IRCCS Neurological Institute C. Besta, Via Celoria 11, 20133 Milan, Italy;2. Institute of Experimental Neurology (INSpe), San Raffaele Scientific Institute, Via Olgettina 60, 20132 Milan, Italy;3. Department of Pathology, University of Brescia, p.le Spedali Civili 1, 25123 Brescia, Italy;4. Department of Management and Technology, Bocconi University, Via Roentgen 1, 20136 Milan, Italy;5. Laboratory of Clinical Pathology and Medical Genetics, Foundation IRCCS Neurological Institute C. Besta, Via Celoria 11, 20133 Milan, Italy;6. Department of Neurology, Heinrich Heine University, Moorenstraße 5, 40225 Düsseldorf, Germany |
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| Abstract: | 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. |
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