The Market Disciplining Effects of FDI: Does the Mode of Entry Matter?

University of Nottingham Research Paper No. 2006/16

32 Pages Posted: 7 Jul 2006

See all articles by Sara Maioli

Sara Maioli

Newcastle University Business School

Ben Ferrett

Loughborough University

Sourafel Girma

Nottingham University Business School

Holger Görg

University of Kiel; Kiel Institute for the World Economy

Date Written: 2006

Abstract

We investigate both theoretically and empirically the competitive discipline effect exerted by FDI on plant-level price-cost margins. Using plant level data for manufacturing industries in the United Kingdom we find robust evidence supporting our theoretical predictions: greenfield FDI has a discipline effect on margins, whilst acquisition FDI increases price-cost margins.

Keywords: Greenfield FDI, Acquisition FDI, Price-Cost Margins, Price Effect, Efficiency

JEL Classification: F2, L1, L6

Suggested Citation

Maioli, Sara and Ferrett, Ben and Girma, Sourafel and Gorg, Holger, The Market Disciplining Effects of FDI: Does the Mode of Entry Matter? (2006). Available at SSRN: https://ssrn.com/abstract=912489 or http://dx.doi.org/10.2139/ssrn.912489

Sara Maioli (Contact Author)

Newcastle University Business School ( email )

5, Barrack road
Newcastle upon Tyne, NE1 4SE
United Kingdom
+44 (0) 191 2081665 (Phone)

Ben Ferrett

Loughborough University ( email )

School of Business and Economics
Loughborough University
Loughborough, LE11 3TU
Great Britain

Sourafel Girma

Nottingham University Business School ( email )

Jubilee Campus
Nottingham, NG8 1BB
United Kingdom
+44 0 115 8466656 (Phone)

HOME PAGE: http://www.nottingham.ac.uk/~lizsmg/

Holger Gorg

University of Kiel ( email )

Olshausenstr. 40
D-24118 Kiel, Schleswig-Holstein 24118
Germany

Kiel Institute for the World Economy ( email )

P.O. Box 4309
Kiel, Schleswig-Hosltein D-24100
Germany

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