A Model of Competition between Multinationals

Onur Koska

MPRA Paper from University Library of Munich, Germany

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.

Keywords: Market Entry; Foreign Direct Investment; Acquisition; Trade (search for similar items in EconPapers)
JEL-codes: D21 F23 L13 (search for similar items in EconPapers)
Date: 2014-11-23
New Economics Papers: this item is included in nep-com, nep-cse and nep-int
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Citations: View citations in EconPapers (5)

Published in METU Studies in Development 2.42(2015): pp. 271-298

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:68024

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