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Gains from multinational competition for crossborder firm acquisition

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  • Koska, Onur A.

Abstract

This study shows that when there is multinational competition for foreign acquisition, the strategic use of a consumer welfare argument in regulating foreign market entry leads to a preemptive foreign acquisition. Even under fierce competition, foreign acquisition will emerge as part of a non-cooperative equilibrium (although multinationals would have gained more had they been able to credibly commit to a cooperative equilibrium of independent foreign sales, either via greenfield investment or trade under complete liberalization) which increases local welfare by more than both the case without foreign market entry and the case with foreign market entry via independent foreign sales.

Suggested Citation

  • Koska, Onur A., 2018. "Gains from multinational competition for crossborder firm acquisition," Economics Discussion Papers 2018-19, Kiel Institute for the World Economy (IfW).
  • Handle: RePEc:zbw:ifwedp:201819
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    References listed on IDEAS

    as
    1. Markus Dertwinkel-Kalt & Christian Wey, 2016. "Merger Remedies in Oligopoly under a Consumer Welfare Standard," Journal of Law, Economics, and Organization, Oxford University Press, vol. 32(1), pages 150-179.
    2. Volker Nocke & Michael D. Whinston, 2010. "Dynamic Merger Review," Journal of Political Economy, University of Chicago Press, vol. 118(6), pages 1201-1251.
    3. Elhanan Helpman & Marc J. Melitz & Stephen R. Yeaple, 2004. "Export Versus FDI with Heterogeneous Firms," American Economic Review, American Economic Association, vol. 94(1), pages 300-316, March.
    4. Onur A. Koska, 2016. "A Consumer-Surplus Standard in Merger Approvals, Foreign Direct Investment, and Welfare," ERC Working Papers 1612, ERC - Economic Research Center, Middle East Technical University, revised Oct 2016.
    5. Breinlich, Holger & Nocke, Volker & Schutz, Nicolas, 2017. "International aspects of merger policy: A survey," International Journal of Industrial Organization, Elsevier, vol. 50(C), pages 415-429.
    6. Marie Goppelsroeder & Maarten Pieter Schinkel & Jan Tuinstra, 2008. "QUANTIFYING THE SCOPE FOR EFFICIENCY DEFENSE IN MERGER CONTROL: THE WERDEN-FROEB-INDEX -super-," Journal of Industrial Economics, Wiley Blackwell, vol. 56(4), pages 778-808, December.
    7. Marie Goppelsroeder & Maarten Pieter Schinkel & Jan Tuinstra, 2006. "Quantifying the Scope for Efficiency Defense in Merger Control: The Werden-Froeb-Index," Tinbergen Institute Discussion Papers 06-074/1, Tinbergen Institute.
    8. Koska, Onur A., 2014. "A Model of Competition between Multinationals," MPRA Paper 68024, University Library of Munich, Germany.
    9. Pehr-Johan Norbäck & Lars Persson, 2008. "Globalization and profitability of cross-border mergers and acquisitions," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 35(2), pages 241-266, May.
    10. repec:bla:reviec:v:26:y:2018:i:1:p:60-83 is not listed on IDEAS
    11. Onur A. Koska & Ngo Van Long & Frank Stähler, 2018. "Foreign direct investment as a signal," Review of International Economics, Wiley Blackwell, vol. 26(1), pages 60-83, February.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    cross-border firm acquisitions; foreign market entry regulations; greenfield investment; trade; consumer welfare;

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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