Market Structure and Foreign Direct Investment
REVIEW OF INTERNATIONAL ECONOMICS
Posted: 4 Apr 1997
In this paper we investigate how strategic interactions among domestic and foreign producers influence the structure of the industry. Especially, we focus on the foreign firms choice between exporting versus servicing these markets by investing in a plant located in host country when is facing competition from a domestic oligopoly. The empirical investigation reveals that the relationship between FDI and tariffs is not as simple as previously thought. In highly concentrated industries, where strategic behaviour may play an important role, high tariffs rather than low tariffs may lead to less FDI and more imports.
JEL Classification: F13, F23
Suggested Citation: Suggested Citation