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
Date Written: 2006
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: Suggested Citation