The role of foreign direct investment in the host-country firm selection process: firm-level evidence from Slovenian manufacturing

Multinational firms and host country market structure: A review of empirical literature

“…Anwar and Sun, 2012;Franco and Gelübcke, 2013), that is, higher foreign presence increases the exit rate, while other authors found a negative relationship (e.g. Backer and Sleuwaegen, 2003;Görg and Strobl, 2003;Burke et al, 2008;Kejžar, 2011) which means that higher foreign presence decreases the exit rate and, consequently, generates a more competitive market structure. There are also studies whose results are not statistically significant (e.g.…”

“…According to Dunning and Lundan (2008), the entry by a foreign firm increases competition which induces improvements in the productivity of the incumbent firms. As reported by Kejžar (2011), multinationals' activities in the host country can generate positive productivity spillovers to indigenous firms which reduce a domestic firm's average production costs expanding its price-cost margin. Thus, in this case we can expect a greater probability of survival (reduced probability of exit) of domestics firms and increasing market competition.…”

“…In fact, according to the author, initial foreign entry increases the exit rates of domestic firms but afterward the growth of foreign sales has a positive effect on the survival of domestic firms, that is, domestic firms benefit from foreign presence. In this way, as Kosová (2010) Note that in addition to the foreign presence some authors (e. g. Backer and Sleuwaegen, 2003;Kejžar, 2011) also use other explanatory variables related to FDI or multinationals, such as foreign entry and foreign exit. Backer and Sleuwaegen (2003) concluded that foreign entry has a negative effect on the entry of domestic entrepreneurs, eventually due to a stronger competition in the product market and attraction of the best workers.…”

“…11 The exception occurs with Backer and Sleuwaegen (2003) and Kejžar (2011). Backer and Sleuwaegen (2003) resort to the relative number of foreign firms while Kejžar (2011) opts for the regional intra-industry foreign firm concentration in terms of employment shares and for 9 Siegfried and Evans (1994), who developed a survey on empirical studies on entry and exit, report that earlier empirical work used net entry. Since this measure treats exits as negative entries, it imposes the structural determinants of entry to be identical to the structural determinants of exit.…”

“…Finally, other authors resort to the probability of exit. Kejžar (2011) defines the probability of exit as a binomial variable taking the value of 1 in the year of a firm's exit and 0 for all previous years.…”