278 research outputs found
Economising, Strategising and the Vertical Boundaries of the Firm
Acknowledgments: We are grateful to Celine Azemar, Ron Davies, Rodolphe Desbordes, Hartmut Egger, Holger Görg, Michael Moore, Ali Naghavi, Peter Neary, Pascalis RaimondosMÞller, Ian Wooton and two anonymous referees for useful comments and suggestions. The usual disclaimer applies.Peer reviewedPublisher PD
Dundee Discussion Papers in Economics 215:Outsourcing versus FDI in oligopoly equilibrium
We consider the make-or-buy decision of oligopolistic firms in an industry in which
final good production requires specialised inputs. Factor price considerations dictate
that firms acquire the intermediate abroad, by either producing it in a wholly owned
subsidiary or outsourcing it to a supplier who must make a relationship specific
investment. Firmsâ internationalisation mode depends on cost and strategic
considerations. Crucially, asymmetric equilibria emerge, with firms choosing different
modes of internationalisation, even when they are ex-ante identical. With ex-ante
asymmetries, lower cost producers have a stronger incentive to vertically integrate
(FDI), while higher cost firms are more likely to outsource
Intellectual Property Rights and Entry into a Foreign Market: FDI vs. Joint Ventures
We study the effect of the intellectual property rights (IPR) regime of a host country (South) on a multinational's decision between serving a market via greenfield foreign direct investment to avoid the exposure of its technology or entering a joint venture (JV) with a local firm, which allows R&D spillovers under imperfect IPRs. JV is the equilibrium market structure when R&D intensity is moderate and IPRs strong. The South can gain from increased IPR protection by encouraging a JV, whereas policies to limit foreign ownership in a JV gain importance in technology intensive industries as complementary policies to strong IPRs.Joint Ventures, Intellectual Property Rights, Technology Transfer, R&D Spillovers, FDI Policy
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