statistical significance, it is often weak and depends on model specifications. One possible explanation for the mixed results offered by Weche (2018) is that the positive spillovers and competitive impacts of FDI cancel each other out or vary in magnitude across countries.

In one of the few studies focusing on a developing economy, Sivadasan (2009) explores the relaxation of FDI restrictions in India and finds a significant long-term negative impact on output prices, possibly indicating higher levels of competition from FDI. He also finds a positive impact on productivity and decomposes the productivity gains to show that they are likely the result of technological adoption and not shifts in market power toward more productive firms. Together, these findings indicate that FDI in developing economies may increase competition and reduce markups while still having positive technological spillovers. In another study of the Indian market, Stiebale and Vencappa (2018) analyze how acquisitions by domestic and international firms have differential impacts on target firms and product markets. They find that acquisitions by foreign firms lead to increases in quality and markups as well as a fall in quality-adjusted prices. This suggests that foreign acquisitions increase markups of acquired firms, but positive spillovers in quality are passed to consumers at the same time. The findings suggests that the quality effect dominates the markup effect but the authors do not rigorously test this conclusion in aggregate terms.

Finally, Forte (2016) provides a comprehensive survey of the literature pertaining to FDI’s impact on concentration as well as its impact on domestic firm entry and exit. She finds mixed results regarding concentration with different studies finding both positive and negative impacts of FDI. When looking at domestic firm entry, she finds a positive relationship but observes mixed results around exit and survival. Her study outlines vast heterogeneity between countries and methodologies that have been observed in the literature and highlights the importance of further research, particularly in developing countries. The remainder of this paper attempts to address this gap by examining the impact of FDI on market power within the developing country context of Vietnam.

# III. Methodology

This paper focuses on markups as our primary measure of market power. .<sup>3</sup> For the purposes of this paper, we modify this expression slightly to _P/MC_ (price divided by marginal cost) in line with De Loecker and Warzynski (2012) due to the ability to estimate this measure using firm-level data, but the interpretation remains the same. In conceptual terms, markups measure the ability of firms to exert their market power and price goods above the socially optimal outcome of prices equaling marginal costs under perfect competition. Thus, positive markups indicate market power and loss of social welfare. Nevertheless, in practice, firms may also charge prices above marginal costs in response to other incentives different than market power. For instance, firms may increase prices to cover high fixed costs, leading to higher markups in the market.

Market power can also be assessed by concentration measures such as the Herfindahl-Hirschman Index (HHI) or firm entry and exit data, which are commonplace among legal practitioners and regulators in part

> 3 The standard definition of markups is commonly termed the Lerner index as it is built upon the work of Lerner (1934). In practice, there are certain reasons why the Lerner index may not be a completely perfect measure of market power, but in general it provides a closer measure than more indirect approaches of studying market power such as measures of concentration. For more information, refer to the discussion in Elzinga and Mills (2011).

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