Abstract

FDI by building theoretical models predict different patterns of host country enterprises to enter the price - the cost of surplus the impact of tools and the use of fixed effects panel and revised after the effective clustering of different GMM estimation model, between 1991 and 2001 on the import and FDI for the UK manufacturing enterprises PCM competitive effects of regulation for the empirical study: green FDI has negative impact on profits, while the impact of acquisition FDI on profits is positive, that is green with regulation of FDI on the PCM effect of mergers and acquisitions will increase FDI PCM. This is the first use of enterprise data and distinguish between different types of FDI research papers for this issue. We propose a theoretical framework to predict the impact of inward FDI on the host country's incumbent firms' price-cost margins, according to the mode of entry of FDI We then investigate empirically the competitive discipline effect exerted by both imports and FDI on manufacturing plant- level price-cost margins in the UK, for the period 1991-2001. We estimate different specifications of the price-cost margin equation with both fixed-effects instrumental panel estimator and efficient generalized method of moments estimator with clustering correction. The evidence found is very robust in supporting the existence of a dichotomy in line with our theoretical predictions: greenfield FDI has a discipline effect on margins, whilst non-greenfield FDI increases price-cost margins