UGF Lecture 5

Management > Global Firm > Oligopolies > Studies > Hypothesis testing > Conclusions > Other studies

Other studies

Going beyond Knickerbocker and Flowers, Graham (1978) found that oligopolistic collusive behaviours was directly related to two-way investments between the US and Europe (an issue raised by Hymer).

Graham found a tendency for the first entry into a European market by a US firm to be followed by a likewise movement by a European firm into the US. Subsequently, a cluster of other European firms follow. This implies that European firms with the strongest OAs perceive the best way of defending their position is to retaliate against the US firm's entry. A global oligopoly can occur as a result.

Graham concludes that the speed and intensity of the response correlates with the level of concentration in European markets. The entry of the US firms into Europe would make European firms less complacent, as the US companies are likely to have OAs which are advantageous. This would also cause realisation that European firms would likely have advantageous OAs if they moved to the US. Moving to the US may also help European firms compete in home markets as well.

Again, although the Europen first move is explained, the US original move remains unknown.