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Technology transfers and optimal entry strategies for the multinational firm

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  • Ayca Tekin-Koru

Abstract

This paper develops an oligopolistic model in which firms can choose between three different modes of entry to address three broad questions: (1) What is the role of trade costs and start-up costs in the entry decision if cross-border acquisitions involve no technology transfers? (2) How does the level of harmonization of technologies between the multinational and the acquired firm change the optimal mode of entry? (3) What is the role of market concentration on the entry decision given positive levels of technology transfers to the acquired firm? We show that in the case of cross-border acquisitions higher tariffs may act as an entry barrier by raising the reservation price of the acquisition target. Our analysis also underlines the importance of the usefulness of transferred technology. Acquisitions become more likely as the degree of harmonization between the multinational's and acquired firm's assets increases. Finally, we demonstrate that market concentration plays a non-trivial role in the entry decision when the technology transfers are not complete or as useful on the multinational.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal The Journal of International Trade & Economic Development.

Volume (Year): 18 (2009)
Issue (Month): 4 ()
Pages: 553-574

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Handle: RePEc:taf:jitecd:v:18:y:2009:i:4:p:553-574

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Related research

Keywords: foreign direct investment; entry modes; technology transfers; tariff-jumping;

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Cited by:
  1. Marlene Grande & Aurora A. C. Teixeira, 2011. "Linking entry mode choices of MNCs with countries’ corruption. A review," OBEGEF Working Papers 008, OBEGEF - Observatório de Economia e Gestão de Fraude & OBEGEF Working Papers on Fraud and Corruption.
  2. Tekin-Koru, Ayca, 2009. "Asymmetric effects of trade costs on entry modes: Firm level evidence," MPRA Paper 21483, University Library of Munich, Germany.

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