International mergers: Incentives and welfare

Qiu, Larry D.; Zhou, Wen

doi:10.1016/j.jinteco.2004.12.005

Cited by 85 publications

(60 citation statements)

References 28 publications

(32 reference statements)

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“…In price competition the rival's response does benefit the firm. 18 Yet, as the goods become closer substitutes, information about the demand intercept becomes less important for the equilibrium prices; indeed, with Bertrand competition (i.e., perfect substitutes) the equilibrium price is determined only by cost. The upshot is our second insight: the more substitutable the goods, the less valuable the demand information is and hence the more likely that the foreign firm chooses exporting over FDI in both price and quantity competition.…”

Section: Resultsmentioning

confidence: 99%

Exporting versus Foreign Direct Investment: Learning Through Propinquity

Creane

Miyagiwa

2012

SSRN Journal

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This paper considers the strategic role learning plays on foreign direct investments (FDI) under demand and cost uncertainty. FDI allows a foreign firm to respond more effectively to changing local demand than if it exports. With cost uncertainty, however, FDI has a second effect. Since a foreign firm procures inputs locally as does its home country rival, the problem of learning is transformed from about its private parameter to about the common parameter, which proves harmful in both price and quantity competition. We show that FDI decisions depend on whether the firm faces relatively more demand or cost uncertainty, how differentiated the rival's product is, and to what extent inputs are locally procured.

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Section: Resultsmentioning

confidence: 99%

Exporting versus Foreign Direct Investment: Learning Through Propinquity

Creane

Miyagiwa

2012

SSRN Journal

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“…24 When products are su¢ ciently di¤erentiated ( = l ), g II&N N (t H ; t F = 0) < 0 for all admissible t h implying that the tari¤ saving e¤ect dominates the protection gain leading to international mergers. The intuition can be explained as follows.…”

Section: Free Trade Abroadmentioning

confidence: 99%

“…The immediate examples in the auto industry include the ones between Daimler-Chrysler, Renault and Nissan and GM and Saab. 4 Recently, Horn and Persson (2001b), Norback andPersson (2004, 2006), Benchekroun and Chaudhuri (2006), Bjorvatn (2003) and Qiu and Zhou (2006) study cross border mergers as an alternative mode of entry. 5 In this literature, …rms typically face a trade-o¤ between the …xed cost of an additional plant in the export market and the bene…t of economizing on tari¤s and trade costs.…”

Section: Introductionmentioning

confidence: 99%

On the Relationship between Tariff Levels and the Nature of Mergers

Yildiz¹,

Ulus²

2012

The B.E. Journal of Economic Analysis &Amp; Policy

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This paper employs an endogenous merger formation approach in a two-country oligopoly model of trade to examine the international linkages between the nature of mergers and tari¤ levels. Firms sell di¤erentiated products and compete in a Bertrand fashion in product markets. We …nd two e¤ects playing key roles in determining equilibrium market structure: the tari¤ saving e¤ ect and the protection gain e¤ ect. The balance between these two e¤ects implies that, when foreign country practices free trade, unilateral tari¤ reduction by a domestic country yields international mergers irrespective of the substitutability levels. By contrast, when foreign tari¤s are su¢ ciently high and products are close substitutes, national mergers obtain in the equilibrium. Therefore, the implications of unilateral trade liberalization on the equilibrium market structure depends on the trade regime in foreign country especially when products are close substitutes. Unlike this asymmetric result of unilateral trade liberalization, we …nd that when bilateral tari¤s are su¢ ciently low, international mergers arise. These results …t well with the fact that global trade liberalization has been accompanied by an increase in international merger activities. Finally, from a welfare perspective, we show that international mergers are preferable to national mergers and thus social and private merger incentives become aligned together as trade gets bilaterally liberalized.

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“…Beckfield (2009), who studies European integration and individual levels of income, reports reduced betweencountry income inequality but increased within-country income inequality. The inconclusiveness of these outcomes also pervades research on firms: whereas Qiu and Zhou (2006) report increased profitability following the international merger of firms, Greenaway et al (2008) point to a greater likelihood of a closedown when a firm faces tighter competition in a liberalized market. An interesting strand of literature deals with the merger of firms and workplaces, employing "social identity theory" (originally developed by Tajfel and Turner 1979).…”

Section: Introductionmentioning

confidence: 99%

The merger of populations, the incidence of marriages, and aggregate unhappiness

2011

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International mergers: Incentives and welfare

Cited by 85 publications

References 28 publications

Exporting versus Foreign Direct Investment: Learning Through Propinquity

Exporting versus Foreign Direct Investment: Learning Through Propinquity

On the Relationship between Tariff Levels and the Nature of Mergers

The merger of populations, the incidence of marriages, and aggregate unhappiness

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