Host country's strategic policies and multinational firm's choice of entry mode

Bong Geul Chun

Economic Modelling, 2012, vol. 29, issue 2, 435-443

Abstract: This paper examines the effects of contract enforceability and market structure on a firm's choice between licensing and foreign direct investment. Clearly, the firm's choice impacts upon social welfare in the host country. Therefore, the government of the host country is likely to set contract enforceability for inducing the multinational firm (MNF) to choose a desirable mode of entry. The paper takes into account two different cases. In the first case, the host country does not have an incumbent that can compete with the MNF, and in the second case, it has one incumbent that can compete. The paper shows that the government's choice of contract enforceability is crucially dependent upon the domestic market structure and the domestic capacity to absorb the advanced technology of the MNF.

Keywords: Foreign direct investment; Licensing; Contract enforceability; Social welfare; Government policies (search for similar items in EconPapers)
JEL-codes: F23 O38 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:29:y:2012:i:2:p:435-443

DOI: 10.1016/j.econmod.2011.11.014

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