Abstract
This paper investigates how two entry modes of foreign direct investment should affect industry lobbying for trade protection in different ways. The paper hypothesises that, in the case of green-field investment, as the number of firms increase in an investment-receiving sector, the firms will find it harder to coordinate industry-level protectionist demand and that (concordantly) as the size of protectionist rents to each firm decreases, firms will have less incentive to lobby. In contrast, in the case of mergers and acquisitions investment, where foreign firms acquire domestic firms, the domestic-owned producer concentration ratio should increase. This in turn may intensify political ‘weight’ on the industry or make coordinated collective actions easier in domestic firms. As a result, domestic firms in the investment-receiving sector should be able to secure more efforts to lobby for trade protection. An empirical test of industry petitions to the US International Trade Commission supports this hypothesis.
Published Version
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