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Entry Strategies, Welfare Analysis and Firms’ Behaviors

Author

Listed:
  • Wang Xun
  • Luo Ting

Abstract

Before serving a new market, a multinational enterprise (MNE) has several entry strategies, which include foreign direct investment (FDI), joint venture (JV) and exclusive licensing (EL). Entry cost, market size of the host country, and the discount rate are the main determinants when the MNE chooses its optimal entry strategy. At a certain level of ownership share that the MNE holds, JV will generate the highest social welfare. If firms can choose between competition and collusion, at different levels of the discount rate under FDI and EL, collusive and cheating behavior will happen.

Suggested Citation

  • Wang Xun & Luo Ting, 2007. "Entry Strategies, Welfare Analysis and Firms’ Behaviors," DEGIT Conference Papers c012_046, DEGIT, Dynamics, Economic Growth, and International Trade.
  • Handle: RePEc:deg:conpap:c012_046
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    File URL: http://degit.sam.sdu.dk/papers/degit_12/C012_046.pdf
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    Keywords

    Entry strategies; Multinational enterprise; Welfare; Collusion; Cheating;

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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