A Theory of Inernational Strategic Alliance

Zhiqi Chen

No 99-08, Carleton Economic Papers from Carleton University, Department of Economics

Abstract: As an alternative to exporting, a firm can enter a foreign market by forging a strategic alliance with its foreign counterparts. The alliance, in the form of a bilateral supply and distribution agreement, eliminates trasportation costs and duplications in product distribution networks. Furthermore, even though it does not involve equity sharing and firms continue to compete against each other, strategic alliance tends to lessen competition in the sens that it leads to smaller outputs and higher prices. The effects on welfare, measured by total surplus, is in general ambiguous. But strategic alliance improves welfare if demand function is linear. Other sufficient conditions for welfare improvement are also derived.

Keywords: strategic alliance; supply and distribution agreement; reciprocal dumping (search for similar items in EconPapers)
JEL-codes: F12 L49 (search for similar items in EconPapers)
Pages: 22 pages
Date: 1999-06, Revised 2003-11
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Published: – revised version in Review of International Economics, Vol. 11, No. 5 (November 2003), pp. 758–769

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Journal Article: A Theory of International Strategic Alliance (2003)
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