Multinational entry and host-country effects

Abstract

In three essays, this thesis contributes to the literature by examining a multinational firm’s mode of serving a foreign market in different contexts. In doing so, it also looks at host country effects of foreign entry such as competition, changes in market structure and productivity. The first chapter examines to what extent policy measures aimed at reducing trade and investment barriers can induce firms to increase their trade and foreign direct investments inside an integrating region. In the second chapter, the question is how a multinational’s mode of entry affects the decisions of firms in the host country industry and what implications this interaction has for market structure, investments and welfare in the host-country. While the first two chapters attempt to rationalise empirical observations in theoretical models, the third chapter is an empirical analysis. It examines whether foreign and domestic firms differ in their contributions to productivity growth. It also explores whether greenfield entry and entry via acquisition have a different impact on the productivity of host-country firms. The remainder of this introduction provides a non-technical summary of the three essays and their main contributions.