Investigating the Impact of Market Power on Foreign Direct Investment Absorption in Concentrated and Unconcentrated Industries in Iran

Abstract

The central purpose of this thesis is investigating the relationship between market structure and absorption of foreign direct investment in Iran manufacturing industries. Four firm concentration ratio and Herfindal-Hirschman index are used to measure market power. Analysis of these indexes determines the concentrated and monopoly in the market and also provides a good background for understanding the relationship between market structure with FDI. In other words, this research seeks to answer that the 10 industries in ISIC based on two-digit code in Iran industries during 1996 to 2008 have what market structure (concentrated or unconcentrated) and what effect it has on absorption of FDI. Using regression analysis and panel data model, estimation results of model showed that there is a negative relationship between concentrated market structure with absorption of FDI. In Iran industries there is a positive relationship between export and economic scales with FDI.

Keywords: Foreign Direct Investment, Market Power, Market Structure.