American Economic Journal:
Applied Economics
ISSN 1945-7782 (Print) | ISSN 1945-7790 (Online)
Foreign Rivals Are Coming to Town: Responding to the Threat of Foreign Multinational Entry
American Economic Journal: Applied Economics
vol. 10,
no. 4, October 2018
(pp. 120–57)
Abstract
How do domestic firms respond to the threat of foreign competition? This paper quantifies foreign competition threats by exploiting news of potential multinational investments from over 35,000 media outlets around the world. Using firm-specific measures of foreign competition threat, the analysis shows that domestic firms respond by upgrading productivity, raising innovation, and altering product composition. However, there is a U-shape relationship between initial productivity and productivity growth where the right and left tails upgrade productivity through innovation and product dropping, respectively. These responses constitute an economically important source of gains and convey new implications for the timing of economic policies.Citation
Bao, Cathy Ge, and Maggie Xiaoyang Chen. 2018. "Foreign Rivals Are Coming to Town: Responding to the Threat of Foreign Multinational Entry." American Economic Journal: Applied Economics, 10 (4): 120–57. DOI: 10.1257/app.20170113Additional Materials
JEL Classification
- D24 Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- F23 Multinational Firms; International Business
- L25 Firm Performance: Size, Diversification, and Scope
- L82 Entertainment; Media
- O30 Innovation; Research and Development; Technological Change; Intellectual Property Rights: General
- Posted by Kun Zhang
- Posted on 10/23/2018 4:28:10 AM
- Updated on 10/23/2018 4:28:41 AM
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