MULTINATIONAL FIRMS AND HOST COUNTRY MARKET STRUCTURE: A REVIEW OF EMPIRICAL LITERATURE

The role of multinational firms in the world economy is widely recognized. Multinationals’ activities produce various effects in the host countries, particularly in areas such as: economic growth, technology and innovatory capacity, employment, market structure, performance and business practices, among others. In this paper we address the impact of multinationals on host country market structure. Although research in this area started a few decades ago, to our knowledge there is still no literature survey on the subject. So, through reviewing existing empirical literature we intend to shed light on the main limitations of existing studies and highlight possible avenues for future research. Our main conclusion is that the majority of studies focus on samples of manufacturing industries/firms, neglecting the service sector, despite its importance. Therefore, future research should be directed to the service sector. Additionally, future studies should explore the possibility of bidirectional causality between the presence of multinationals and the level of industry concentration. Furthermore, studies concerning the impact of foreign presence on entry, exit and survival of host country firms must use more recent data and taking into account other control variables that may affect the exit rate. Finally, future work should take into account the mode of foreign firm establishment in the host country.