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Strategic Trade Policy and the Home Bias in Firm Ownership Structure

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  • Steffen Huck
  • Kai A. Konrad

Abstract

In this note we consider the preferences of a profit maximizing firm for international ownership in a world in which firms compete in an international Cournot oligopoly, and in which countries use strategic trade policy. We find that firms prefer national ownership and show that full indigenisation occurs in the equilibrium.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2003/wp-cesifo-2003-03/cesifo_wp892.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 892.

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Date of creation: 2003
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Handle: RePEc:ces:ceswps:_892

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Keywords: strategic trade; international ownership; Cournot oligopoly; home bias;

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  1. Gordon, R.H. & Bovenberg, A.L., 1994. "Why Is Capital So Immobile Internationally?: Possible Explanations and Implications for Capital Income Taxation," Working Papers 358, Research Seminar in International Economics, University of Michigan.
  2. Adler, Michael & Dumas, Bernard, 1983. " International Portfolio Choice and Corporation Finance: A Synthesis," Journal of Finance, American Finance Association, vol. 38(3), pages 925-84, June.
  3. James A. Brander & Barbara J. Spencer, 1984. "Export Subsidies and International Market Share Rivalry," NBER Working Papers 1464, National Bureau of Economic Research, Inc.
  4. Jonathan Eaton & Gene M. Grossman, 1983. "Optimal Trade and Industrial Policy Under Oligopoly," NBER Working Papers 1236, National Bureau of Economic Research, Inc.
  5. Dick, Andrew R., 1993. "Strategic trade policy and welfare : The empirical consequences of cross-ownership," Journal of International Economics, Elsevier, vol. 35(3-4), pages 227-249, November.
  6. Welzel, Peter, 1995. "Strategic Trade Policy with Internationally Owned Firms," Bulletin of Economic Research, Wiley Blackwell, vol. 47(3), pages 221-32, July.
  7. David M. Kreps & Jose A. Scheinkman, 1983. "Quantity Precommitment and Bertrand Competition Yield Cournot Outcomes," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 326-337, Autumn.
  8. JoAnne Feeney & Arye Hillman, 1999. "Privatization and The Political Economy of Strategic Trade Policy," Discussion Papers 99-05, University at Albany, SUNY, Department of Economics.
  9. Maggi, Giovanni, 1996. "Strategic Trade Policies with Endogenous Mode of Competition," American Economic Review, American Economic Association, vol. 86(1), pages 237-58, March.
  10. Barros, Pedro P. & Cabral, Luis, 1994. "Merger policy in open economies," European Economic Review, Elsevier, vol. 38(5), pages 1041-1055, May.
  11. Tesar, Linda L. & Werner, Ingrid M., 1995. "Home bias and high turnover," Journal of International Money and Finance, Elsevier, vol. 14(4), pages 467-492, August.
  12. Konrad, Kai A. & Erik Lommerud, Kjell, 2001. "Foreign direct investment, intra-firm trade and ownership structure," European Economic Review, Elsevier, vol. 45(3), pages 475-494, March.
  13. Kenneth R. French & James M. Poterba, 1991. "Investor Diversification and International Equity Markets," NBER Working Papers 3609, National Bureau of Economic Research, Inc.
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Cited by:
  1. Steffen Huck & Kai A. Konrad, 2003. "Strategic Trade Policy and Merger Profitability," CESifo Working Paper Series 948, CESifo Group Munich.

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