Foreign ownership, competition, and survival dynamics


Taymaz E., Oezler S.

REVIEW OF INDUSTRIAL ORGANIZATION, vol.31, no.1, pp.23-42, 2007 (Peer-Reviewed Journal) identifier identifier

  • Publication Type: Article / Article
  • Volume: 31 Issue: 1
  • Publication Date: 2007
  • Doi Number: 10.1007/s11151-007-9144-x
  • Journal Name: REVIEW OF INDUSTRIAL ORGANIZATION
  • Journal Indexes: Social Sciences Citation Index, Scopus
  • Page Numbers: pp.23-42
  • Keywords: FDI, firm dynamics, survival, turkish manufacturing industries, FIRMS, ENTRY, EXIT, TECHNOLOGY, SPILLOVERS, DETERMINANTS

Abstract

The impact of foreign direct investment on host countries' industrial sectors has received considerable attention. It is shown by many researchers that foreign plants are more productive than are domestic ones, but the empirical evidence regarding spillovers is not unambiguous. In this paper, we suggest that the impact of foreign direct investment on local industry hinges on the dynamics of foreign and domestic plants-i.e., on entry and selection (exit) processes. Our analysis of foreign investment and competition dynamics in Turkish manufacturing industry for the period 1983-2001 indicates that foreign plants have a better performance level than do domestic ones when they are first established in the local market, and, subsequently, are more likely to survive but; the difference in survival probabilities disappears when the industry and/or plant characteristics are controlled for. Moreover, foreign presence seems to have no long-term effect on the survival prospects of domestic plants.