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Commercial Policy and Foreign Ownership

Author

Listed:
  • Jota Ishikawa
  • Yoichi Sugita
  • Laixun Zhao

Abstract

To serve the domestic market, foreign multinationals often not only export there but also control local firms through FDI. This paper examines the effects of trade and industrial policies on prices, outputs, profits, and welfare when exports and FDI coexist. Specifically, we focus on the case in which a foreign firm has full control of a local firm through partial ownership. Cross-border ownership on the basis of both financial interests and corporate control leads to horizontal market-linkages through which tariffs and production subsidies may harm a locally-owned firm but benefit a foreign firm. Foreign ownership regulation benefits a locally-owned firm.
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Suggested Citation

  • Jota Ishikawa & Yoichi Sugita & Laixun Zhao, 2011. "Commercial Policy and Foreign Ownership," Review of International Economics, Wiley Blackwell, vol. 19(2), pages 300-312, May.
    • Handle: RePEc:bla:reviec:v:19:y:2011:i:2:p:300-312
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    Cited by:

    1. Tomohiro ARA & Arghya GHOSH & Hodaka MORITA & Hiroshi MUKUNOKI, 2025. "Cross-border Partial Equity Ownership," Discussion papers 25026, Research Institute of Economy, Trade and Industry (RIETI).
    2. Chien-Hui Lee & Jen-Yao Lee & Leonard F.S. Wang, 2021. "Foreign Ownership and Optimal Discriminatory Tariffs under Oligopolistic Competition," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 74(1), pages 97-114.
    3. Nicola Meccheri, 2025. "Port cross-ownership and privatization in international trade with tariff protection," Discussion Papers 2025/325, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    4. Kuang-Cheng Andy Wang & Yi-Jie Wang & Wen-Jung Liang & Chao-Cheng Mai, 2017. "Optimal licensing with equity," Papers in Regional Science, Wiley Blackwell, vol. 96, pages 207-220, March.
    5. Hong-Ren Din & Kuang-Cheng Andy Wang & Wen-Jung Liang, 2016. "MFN vs Tariff Discrimination in the Presence of Cross Ownership," Review of International Economics, Wiley Blackwell, vol. 24(5), pages 1149-1166, November.

    More about this item

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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