A Model of Competition between Multinationals

Koska, Onur A. (2014): A Model of Competition between Multinationals. Published in: METU Studies in Development , Vol. 42, No. 2 (August 2015): pp. 271-298.

Abstract

This study models competition between multinationals, sequentially entering the same market, and analyzes how they choose their entry modes between trade, greenfield investment and acquisition, and how competition amongst them affects their choices. I discuss two important factors that lead a multinational whether or not to acquire a local firm: the intensity of pre- and post-acquisition competition. The former determines both the acquisition price and the profitability of the next best alternative entry mode, whereas the latter determines the extent of business stealing by the rival. The results point to a non-linear relationship between trade and investment liberalization and foreign direct investment.

• Item Type: MPRA Paper
• Language: English
• Keywords: Market Entry; Foreign Direct Investment; Acquisition; Trade
• Subjects: D - Microeconomics > D2 - Production and Organizations > D21 - Firm Behavior: Theory; F - International Economics > F2 - International Factor Movements and International Business > F23 - Multinational Firms ; International Business; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets

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