Analyzing Modes of Foreign Entry
AbstractThis paper studies the entry decision of a multinational enterprise into a foreign market. Two alternative entry modes for a foreign direct investment are considered: Greenfield investment versus acquisition. In contrast to existing approaches, the acquisition price and the profits under both entry modes are endogenously determined. Interestingly, we find that the optimal entry mode decision is a ected by the competition intensity in the market in a non-monotonic way. When markets are very much or very little competitive, greenfield investment is the optimal entry mode, while for intermediate values it is acquisition.
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Bibliographic InfoPaper provided by University of Munich, Department of Economics in its series Discussion Papers in Economics with number 13.
Date of creation: Jan 2001
Date of revision:
Foreign direct investment ; multinational enterprise ; greenfield investment ; acquisition ; transition economies;
Find related papers by JEL classification:
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- P31 - Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions
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