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Strategic investments and multinational firms under oligopoly

Author

Listed:
  • José J. Sempere Monerris

    (Universitat de València)

  • Rafael Moner Colonques

    (Universitat de València)

  • Vicente Orts Ríos

    (Universitat Jaume I)

Abstract

We have developed a simple oligopoly model in which foreign direct investment (FDI) decisions are determined in an endogenous fashion. There is a host oligopoly facing competition from a foreign oligopoly in the form of either foreign investment or exports. Then, we propose a multi-stage game to stress the role played by the interactions among foreign rival firms´ decisions, and we identify some of the determinants of a switch from an exporting strategy to an FDI strategy. A delay in the investment is more likely found for big enough country-specific fixed costs and low values of the oligopoly profitability. Our model provides a theoretical basis which leads to predictions in line with previous empirical studies.

Suggested Citation

  • José J. Sempere Monerris & Rafael Moner Colonques & Vicente Orts Ríos, 1997. "Strategic investments and multinational firms under oligopoly," Working Papers. Serie EC 1997-16, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    • Handle: RePEc:ivi:wpasec:1997-16
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    File URL: http://www.ivie.es/downloads/docs/wpasec/wpasec-1997-16.pdf
    File Function: Fisrt version / Primera version, 1997
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    More about this item

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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