Analyzing Modes of Foreign Entry
This 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.
|Date of creation:||Jan 2001|
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"The Equilibrium Ownership of an International Oligopoly,"
CEPR Discussion Papers
2302, C.E.P.R. Discussion Papers.
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"Endogenous Mergers in Concentrated Markets,"
Working Paper Series
513, Research Institute of Industrial Economics.
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