Beatriz de Blas () and
Katheryn Russ ()
Journal of Economic Behavior & Organization, 2013, vol. 94, issue C, 381-392
Stephen Hymer (1960, 1976) argues that a desire to increase market power is a strong motive for foreign takeovers. Yet the market-power motive for FDI flows has been largely unexplored in the modern theory of heterogeneous firms. This paper shows that foreign direct investment can increase markups under Bertrand competition when firms are heterogeneous, even when no strategic motive is possible. It then outlines two cases arising purely due to trade barriers in which a desire to increase markups in either the source or host country can compel a firm to set up a foreign affiliate, identifying a Hymer–Neary effect in the process.
Keywords: Multinational firm; Heterogeneous firms; Endogenous markup (search for similar items in EconPapers)
JEL-codes: F12 F13 F15 F23 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:94:y:2013:i:c:p:381-392
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