Synergy, learning and the changing industrial structure

Tarun Kabiraj and Ching Chyi Lee

International Economic Journal, 2001, vol. 18, issue 3, 365-387

Abstract: In a set-up of two local firms and one foreign firm, we construct a model to capture the dynamics of local industrial structure induced by formation and breakdown of cross-border joint ventures (JVs). There is a synergic gain to the JV, and the partners learn from each other. Firms play a repeated game. We characterize the resulting industrial configurations under different scenarios as defined by the extent of cost saving. In particular, we show that when cost saving is moderate, an alliance formed between two firms in the first period, breaks up and a new alliance is formed in the second period, but again it breaks up; thereafter the market becomes an oligopoly of all three firms.

Keywords: JEL Classification: F23; L13; O33; Synergy; learning; joint venture; subsidiary; industry structure (search for similar items in EconPapers)
Date: 2001
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DOI: 10.1080/1016873042000270018

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