Global oligopolistic competition and foreign direct investment

Abstract

The purpose of this paper is to re-visit and re-invigorate the oligopolistic industry perspective on MNC strategy. Based on insights from the Industrial Organization tradition and Strategic Management, the paper brings the original insights of the oligopolistic industry perspective into a modern context by outlining a conceptual framework that may guide future International Business (IB) research on MNC strategy in oligopolistic industries. This paper demonstrates how contemporary IB literature pays little attention to a key insight of the early IB literature, namely that FDI often is driven by strategic interaction among MNCs in oligopolistic industries. Instead, the contemporary IB literature focuses on FDI as a way to reduce transaction costs and/or as a way to leverage and build capabilities across borders. The paper argues that progressing global concentration in many industries warrants a rediscovery of the oligopolistic perspective on FDI. The paper provides a comprehensive and unique literature review of the literature on MNC strategy in oligopolistic industries. Based on this review, the paper develops a novel conceptual framework that may inspire future IB research on MNC strategy in oligopolistic industries.

The internationalisation of supermarkets and the nature of competitive rivalry in retailing in southern Africa

“…Along these lines, a motivation for choosing a location was put forward by Knickerbocker (1973) suggesting that firms in oligopolistic markets follow each other's location decisions if they are uncertain about production costs in the host country, and therefore, by following their rivals through 'defensive investments', they reduce risks. It has been shown that firms which compete in domestic markets tend to follow each other to the same foreign markets, while noncompeting firms try to avoid each other geographically when internationalising (Hansen & Hoenen, 2016).…”

Are Foreign Subsidiaries Cooperating for Innovation With Local Partners?

“…Thirdly, the confluence of a large number of foreign MNEs active in various sectors of the host economy may favour local cooperation for innovation. Exclusive clientsupplier relationships are sometimes extended from the home country of these companies into the host country (Hansen, 2016;Rama & Ferguson, 2007). These foreign firms may have built global alliances, whereby cooperation in Spain constitutes only a part of their worldwide linkages.…”

Cross‐investments by multinationals: A new perspective

“…From a business perspective, managers need to accurately predict the reactions of other firms when making decisions over market entry (Argyres et al, 2019;Hansen & Hoenen, 2016). The output decisions predicted by the Cournot model approximate closely to practical outcomes, even though the decision-making process may seem unconventional, and so the model is eminently suitable for analyzing strategic decision-making in international business.…”