Direct investment and industrial concentration

Cross‐national comparison of industrial concentration is considered here in terms of two hypotheses. The ‘technology/market size’ hypothesis [Merhav, 1969] predicts greater concentration in less developed countries than in the larger markets of developed countries. The ‘miniature replica’ hypothesis predicts that, when the degree of foreign ownership is high, industries in less developed countries may be less concentrated than their counterparts in advanced countries. Most cross‐national comparisons of firm size distributions support a predominance of ‘technology/market size’ effects. In this paper, data from the pharmaceutical industry in Brazil and other less developed countries are used to suggest that under certain conditions ‘miniature replica’ effects may prevail.