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Competition between Firms in Developing and Developed Countries

Discussion Papers


June 2014


We analyze competition in emerging markets between firms in developing and developed countries from the viewpoint of the boundaries of the firm. Although indigenous firms generally face a disadvantage in technology compared with foreign firms, they have an advantage in marketing as local firms. Moreover, they have opportunities to leave weaker fields to independent specialized firms and use lower wages. On the other hand, foreign firms also have their own advantages and disadvantages for growth. Therefore, entry conditions for indigenous firms can vary greatly depending on the situation. We classify these conditions into eight cases by developing a model and showing each boundary choice for indigenous firms.

Keywords: the boundaries of the firm; indigenous firms; foreign firms; developing countries; developed countries
JEL classification: F23, L22, O12

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