Review of Industrial Organization 20: 15–31, 2002.
© 2002 Kluwer Academic Publishers. Printed in the Netherlands.
Multinational Companies and Entrant Start-up Size:
Evidence from Quantile Regressions
School of Economics, University of Nottingham, Nottingham NG7 2RD, U.K.
Department of Economics, University College Dublin, Belﬁeld, Dublin 4, Ireland
Abstract. This paper analyses the impact of foreign multinationals on the start-up size of domestic
entrants in Irish manufacturing industries. We use the regression quantile estimator, which allows us
to take account of the heterogeneity of entrants’ start-up size. Estimation results show that the pres-
ence of foreign multinationals in a sector impacts negatively on the start-up size of domestic entrants
of all sizes in modern sectors and on the start-up size of large domestic entrants in traditional sectors.
This negative effect may be attributed to competition of domestic plants with foreign multinationals
and other domestic plants in the ﬁnal goods and/or the intermediate goods market.
Key words: Entry, multinational companies, regression quantiles, start-up size.
JEL Classiﬁcations: F23, L60.
Much of the literature on the economic effects of multinational companies (MNCs)
on a host economy has focused on technology spillovers and the resulting effects
on domestic ﬁrms’ productivity.
In this paper we analyse another possible effect of
MNCs, viz., the relationship between MNCs and the entry process of host country
ﬁrms. In a recent model Markusen and Venables (1999) show that foreign mul-
tinationals located in the host country can be expected to have an impact on the
entry of domestic ﬁrms through the creation of forward and backward linkages,
and through introducing higher levels of competition.
The authors are grateful to two anonymous referees and participants at seminars at University
College Cork, the University of the West Indies, and the International Atlantic Economic Conference
in Munich for helpful comments. This paper is produced as part of a CEPR research network on
Foreign Direct Investment and the Multinational Corporation: New Theories and Evidence, funded
by the European Commission under the Training and Mobility of Researchers Programme (contract
No ERBFMRXCT980215). Holger Görg gratefully acknowledges additional ﬁnancial support from
the Leverhulme Trust (Grant No. F114/BF).
See Görg and Strobl (2001) and Blomström and Kokko (1998) for reviews of this literature.