ABSTRACT
This chapter analyses how foreign direct investment influences market concentration in Mexican manufacturing industries. The standard literature on the multinational corporation (MNC) claims that foreign investment tends to reduce the level of concentration and increase competition in host country industries. The general idea behind the hypothesis that multinationals speed up the concentration process in developing countries is usually as follows: an MNC represents advanced technology. The fact that an MNC possesses different monopolistic advantages may also result in a specific conduct on the part of this firm. Foreign entry may also reduce concentration if entry into concentrated industries is easier for MNCs than for domestically owned firms. Firms in the modern sector producing high-grade goods are in general not directly competing with those in the traditional sector producing low-grade goods, although these firms belong to the same industry according to the statistical classification.
