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A Model of Competition between Multinationals

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  • Koska, Onur A.

Abstract

This study models competition between multinationals, sequentially entering the same market, and analyzes how they choose their entry modes between trade, greenfield investment and acquisition, and how competition amongst them affects their choices. I discuss two important factors that lead a multinational whether or not to acquire a local firm: the intensity of pre- and post-acquisition competition. The former determines both the acquisition price and the profitability of the next best alternative entry mode, whereas the latter determines the extent of business stealing by the rival. The results point to a non-linear relationship between trade and investment liberalization and foreign direct investment.

Suggested Citation

  • Koska, Onur A., 2014. "A Model of Competition between Multinationals," MPRA Paper 68024, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:68024
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    File URL: https://mpra.ub.uni-muenchen.de/68024/1/MPRA_paper_68024.pdf
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    References listed on IDEAS

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    Cited by:

    1. Onur A. Koska, 2018. "Gains from Multinational Competition for Cross-Border Firm Acquisition," ERC Working Papers 1801, ERC - Economic Research Center, Middle East Technical University, revised Jan 2018.

    More about this item

    Keywords

    Market Entry; Foreign Direct Investment; Acquisition; Trade;

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • 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

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