Endogenous Market Structure and Foreign Market Entry

James Markusen and Stähler, Frank
Authors registered in the RePEc Author Service: Frank Stähler

No 7567, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Models dealing with cross-border acquisitions versus greenfield investment usually assume that the entry of a foreign firm into a market has effects on the outputs of all domestic firms in that market, but exit or entry of local firms is not considered. The purpose of this paper is to re-examine the acquisition versus greenfield versus exporting question under fixed versus free entry assumptions for local firms. Our finding is that greenfield entry and exporting options are more attractive relative to acquisition when the local market structure adjusts to foreign entry through local entry or exit than when it is fixed. The entering foreign firm may do better or worse under free entry versus a fixed market structure depending on its optimal choice under the latter assumption.

Keywords: Cross-border acquisitions; Endogenous market structures; Foreign direct investment; Multinational firms (search for similar items in EconPapers)
JEL-codes: F12 F23 (search for similar items in EconPapers)
Date: 2009-11
New Economics Papers: this item is included in nep-com and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Journal Article: Endogenous market structure and foreign market entry (2011)
Working Paper: Endogenous Market Structure and Foreign Market Entry (2009)
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