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Host country's strategic policies and multinational firm's choice of entry mode

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  • Chun, Bong Geul

Abstract

This paper examines the effects of contract enforceability and market structure on a firm's choice between licensing and foreign direct investment. Clearly, the firm's choice impacts upon social welfare in the host country. Therefore, the government of the host country is likely to set contract enforceability for inducing the multinational firm (MNF) to choose a desirable mode of entry. The paper takes into account two different cases. In the first case, the host country does not have an incumbent that can compete with the MNF, and in the second case, it has one incumbent that can compete. The paper shows that the government's choice of contract enforceability is crucially dependent upon the domestic market structure and the domestic capacity to absorb the advanced technology of the MNF.

Suggested Citation

  • Chun, Bong Geul, 2012. "Host country's strategic policies and multinational firm's choice of entry mode," Economic Modelling, Elsevier, vol. 29(2), pages 435-443.
    • Handle: RePEc:eee:ecmode:v:29:y:2012:i:2:p:435-443
    DOI: 10.1016/j.econmod.2011.11.014
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    Cited by:

    1. Kwon, Chul-Woo & Chun, Bong Geul, 2015. "The effect of strategic technology adoptions by local firms on technology spillover," Economic Modelling, Elsevier, vol. 51(C), pages 13-20.
    2. Cai, Dapeng & Karasawa-Ohtashiro, Yukio, 2018. "Greenfield, merger and acquisition, or export? Regulating the entry of multinational enterprises to a host-country market," International Review of Economics & Finance, Elsevier, vol. 56(C), pages 397-407.
    3. Dapeng Cai & Yukio Karasawa‐Ohtashiro, 2021. "Why Do Mandated International Joint Ventures Still Exist?," Contemporary Economic Policy, Western Economic Association International, vol. 39(1), pages 236-247, January.

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    More about this item

    Keywords

    Foreign direct investment; Licensing; Contract enforceability; Social welfare; Government policies;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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