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Foreign Direct investment and Market Structure

Foreign Direct investment and Market Structure

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The issue of market concentration has been widely debated in the literature on industrial organization. Evidence shows that market concentration has implications on the long run growth path of an economy through its effect on the allocation of economic resources among various economic activities including innovation. In the changing scenario at global level, most of the developing economies including India have resorted to liberalization since the late seventies inter-alia with the objective to develop competitive industrial base in the economy. In this context, the present study broadly tries to analyze the impact of Foreign Direct Investment (FDI) on market concentration with special reference to India''s manufacturing industries during the post reform period. The empirical analysis tends to suggest that market concentration in general is showing an increasing trend. Detailed exploration of the trends in concentration across different industries with varying levels of technology further confirmed this finding.