Host market competition, foreign FDI and domestic welfare

Tsai, Yingyi; Mukherjee, Arijit; Chen, Jong-Rong

Abstract

This paper studies the impact on domestic welfare and a foreign firm's entry mode of a greater host market competition. We find that a stronger domestic competition may attract or deter FDI. We also show that higher domestic competition can raise domestic welfare either when it attracts FDI or when it does not affect the foreign firm's entry mode choice. Nonetheless, higher domestic competition may reduce domestic welfare if FDI is deterred. Our finding suggests that competition policy in the host country ought to be complemented by its foreign investment policy when foreign firm makes its FDI/export decision.

Citation

Tsai, Y., Mukherjee, A., & Chen, J. (2016). Host market competition, foreign FDI and domestic welfare. International Review of Economics and Finance, 42, 13-22. https://doi.org/10.1016/j.iref.2015.10.016

• Journal Article Type: Article
• Acceptance Date: Oct 13, 2015
• Online Publication Date: Oct 21, 2015
• Publication Date: Mar 1, 2016
• Deposit Date: Dec 9, 2018
• Journal: International Review of Economics & Finance
• Print ISSN: 1059-0560
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 42
• Pages: 13-22
• DOI: https://doi.org/10.1016/j.iref.2015.10.016
• Keywords: Economics and Econometrics; Finance
• Public URL: https://nottingham-repository.worktribe.com/output/1394327
• Publisher URL: https://www.sciencedirect.com/science/article/pii/S1059056015001665?via%3Dihub