Commercial Policy and Foreign Ownership

Jota Ishikawa, Yoichi Sugita and Laixun Zhao

Global COE Hi-Stat Discussion Paper Series from Institute of Economic Research, Hitotsubashi University

Abstract: To serve the domestic market, foreign multinationals often not only export there but also control local firms through FDI. This paper examines the effects of trade and industrial policies on prices, outputs, profits, and welfare when exports and FDI coexist. Specifically, we focus on the case in which a foreign firm has full control of a local firm through partial ownership. Cross-border ownership on the basis of both financial interests and corporate control leads to horizontal market-linkages through which tariffs and production subsidies may harm a locally-owned firm but benefit a foreign firm. Foreign ownership regulation benefits a locally-owned firm.

Keywords: foreign direct investment; corporate control; tariffs; production subsidies; ownership regulation (search for similar items in EconPapers)
JEL-codes: F12 F13 F23 (search for similar items in EconPapers)
Date: 2008-10
New Economics Papers: this item is included in nep-int and nep-reg
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Related works:
Journal Article: Commercial Policy and Foreign Ownership (2011)
Working Paper: Commercial Policy and Foreign Ownership (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:hst:ghsdps:gd08-005

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