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Title: Foreign firms, price competition and entry decisions : evidence from the Korean experience
Author: Song, Sangmin
Awarding Body: University of Warwick
Current Institution: University of Warwick
Date of Award: 2006
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This thesis studies the competitive role of foreign firms in the host economy. While the popular belief is that foreign firms act as new competitive forces in the host economy, many observers argue that the essence of oligopoly will prevail without foreign firms having any significant impact on competition. To decide which argument is more realistic, this thesis conducts three empirical studies: one on the impact of foreign acquisition on price competition, one on the competitive effect of greenfield FDI firms, and lastly one on entry decisions. The first chapter sets up the main hypotheses to be tested, and briefly outlines the thesis. Chapter 2 investigates the impact of foreign acquisition on price competition, utilizing the sharp contrast in foreign firms’ roles before and after foreign entry in several Korean industries. The estimation strategy is to compare the level of market competitiveness between the two periods through the response of prices to marginal costs. Largely the empirical findings do not support the popular belief. Chapter 3 examines the effect of greenfield FDI firms on price competition, employing the empirical opportunity offered by the grocery superstore sector in Seoul. Focusing on the existence of difference or rivalry between domestic and foreign firms, I develop more specific hypotheses: foreign firms are more competitive in their pricing policies; in response, domestic firms adopt more competitive pricing strategies; as a result, the price competition is fiercer where foreign firms have entered. The findings indicate that there is no difference or rivalry between foreign and domestic chains. Chapter 4 investigates firms’ entry behaviour to infer the underlying nature of competition between foreign and domestic firms. For the test, I utilize entry decisions observed in the Korean grocery sector, which is a fast-growing industry. I check how differently foreign firms behave compared to their domestic counterparts and how they react to each other, using the latent regression of entry decisions. Intense rivalry among large chains in general is found, rather than the rivalry between domestic and foreign chains, implying that foreign firms behave as a member of an oligopoly group rather than as a kind of maverick. Chapter 5 contains some concluding remarks, and discussions on the limitations of the study and possible future work.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available
Keywords: HD Industries. Land use. Labor ; HF Commerce