Question

Why oligopoly firms have similar foreign direct investment (DI) strategic actions?

Answer 1

In the oligopolistic marketing structure the key feature is the interdependence of the firms: when one firm does something it will create an immediate impact on another firm; thus the firms tend to imitate each other. Knickerbocker’s theory suggests that same type of behaviour is noticed in FDI. In the same industry the firms usually pursue foreign direct investment (FDI) at the same time and firms are likely to direct their activities in investment toward the same market, thus creating an impact is in the form of the imitative behaviour. For instance when an American firm opens a subsidiary in Canada, and achieves successful, it perhaps gains a useful and profitable first-mover gain. Other firm also notices the impact on the firm, and imitate the behaviour, thus resulting to further FDI