Endogenous Market Structure and Foreign Market Entry

James Markusen and Frank Stähler

No 15530, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Models dealing with cross-border acquisitions versus greenfield investment usually assume that the entry of a foreign firm into a market has effects on the outputs of all domestic firms in that market, but exit or entry of local firms is not considered. The purpose of this paper is to re-examine the acquisition versus greenfield versus exporting question under fixed versus free entry assumptions for local firms. Our finding is that greenfield entry and exporting options are more attractive relative to acquisition when the local market structure adjusts to foreign entry through local entry or exit than when it is fixed. The entering foreign firm may do better or worse under free entry versus a fixed market structure depending on its optimal choice under the latter assumption.

JEL-codes: F12 F23 (search for similar items in EconPapers)
Date: 2009-11
New Economics Papers: this item is included in nep-com and nep-ent
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Published as James Markusen & Frank Stähler, 2011. "Endogenous market structure and foreign market entry," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 147(2), pages 195-215, June.

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Journal Article: Endogenous market structure and foreign market entry (2011)
Working Paper: Endogenous Market Structure and Foreign Market Entry (2009)
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