Mode, Size, and Location of Foreign Direct Investments and Industry Markups

Journal of Economic Behavior & Organization, Vol. 45, No. 2

Posted: 29 May 2001

See all articles by Wilbur Chung

Wilbur Chung

University of Maryland - Robert H. Smith School of Business

Multiple version iconThere are 2 versions of this paper

Abstract

Several studies find that inward foreign direct investment (FDI) raises host industries' competition and productivity using aggregate FDI measures: the monetary flows or the change in the industries' foreign production share. Yet FDI flows are composed of many individual, heterogeneous investments. Reflecting this heterogeneity, I ask how the average traits of the individual investments that constitute the FDI flow further affect the host. While the results show that inward FDI does heighten competition for US manufacturing industries in 1987-1991, price-cost markups fall even more when foreign investments locate further away from incumbent industry, which is consistent with endogenous location choice.

Keywords: foreign direct investment, competition, location choice, entry mode

JEL Classification: F23, L11

Suggested Citation

Chung, Wilbur C., Mode, Size, and Location of Foreign Direct Investments and Industry Markups. Journal of Economic Behavior & Organization, Vol. 45, No. 2, Available at SSRN: https://ssrn.com/abstract=270248

Wilbur C. Chung (Contact Author)

University of Maryland - Robert H. Smith School of Business ( email )

College Park, MD 20742-1815
United States

HOME PAGE: http://www.rhsmith.umd.edu/faculty/wchung/

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