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Host market competition, foreign FDI and domestic welfare

Yingyi Tsai, Arijit Mukherjee and Jong-Rong Chen ()

International Review of Economics & Finance, 2016, vol. 42, issue C, 13-22

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.

Keywords: Domestic competition; Foreign direct investment; Welfare (search for similar items in EconPapers)
JEL-codes: D43 F21 F23 L1 L10 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (3)

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DOI: 10.1016/j.iref.2015.10.016

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