Edited by Emek Basker
Chapter 8: The role of multinational retailers as foreign direct investment in developing countries
AbstractMultinational retailers have entered developing countries on a large scale. Compared with traditional retailers in the host countries, multinational retailers purchase in larger quantities and have better international networks, which allow them have stronger bargaining power with local suppliers and ultimately pay lower prices for better quality products. Previous studies demonstrate that entry of foreign retailers benefits upstream local suppliers, making them more innovative and productive and increasing their exports. In contrast, foreign retailers have strong market-stealing and pro-competitive effects on local retailers. The total profits of traditional domestic retailers drop owing to the entry of foreign retailers, with both the number of traditional domestic stores and average profits negatively affected. Finally, the entry of foreign retailers effectively reduces the cost of living of local residents, particularly for high-income households.
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