Asymmetric interactions between foreign and domestic banks: Effects on market entry

Research output: Journal PublicationArticlepeer-review

21 Citations (Scopus)

Abstract

An inverted U-shaped relationship is thought to exist between the number of firms entrenched in a market and the rate of new entrants. This study examined early and late entry by foreign and U.S. banks into the California market following a deregulation in the banking industry in the early 1980s. The study was designed to elucidate the competitive interactions between foreign and domestic banks. Specifically, what response did the entry of foreign banks elicit from domestic banks and what influence did the entry of domestic banks exert on the evolution of the foreign banks in the market. Data covering the period from 1979 to 1988 demonstrate that the density of foreign banks operating in the market had a U-shaped relationship with the rate of entry of U.S. banks, supporting the argument that foreign investment can encourage the expansion of domestic banks. Although foreign banks were not an obstacle to domestic bank entries, the presence of domestic banks deterred the entry of foreign banks.

Original languageEnglish
Pages (from-to)873-893
Number of pages21
JournalStrategic Management Journal
Volume29
Issue number8
DOIs
Publication statusPublished - Aug 2008
Externally publishedYes

Keywords

  • Foreign competition
  • Liability of foreignness
  • Signaling
  • Strategic groups

ASJC Scopus subject areas

  • Business and International Management
  • Strategy and Management

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