Privatization in the presence of foreign competition and strategic policies

Dijkstra, Bouwe R.; Mathew, Anuj J.; Mukherjee, Arijit

doi:10.1007/s00712-014-0407-3

Cited by 7 publications

(5 citation statements)

References 26 publications

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“…Hence, there is a trade-off between consumer surplus and domestic profits. The trade-off is responsible for creating partial privatization in our analysis under FDI, which is in line with the results of Mukherjee and Suetrong (2009) and Dijkstra et al (2015).…”

Section: Welfare Analysissupporting

confidence: 89%

“…However, greater output benefits the foreign firm more under FDI than export, because the foreign firm’s fixed cost under FDI does not depend on the output, and the transportation cost under export increases with the output of the foreign firm. Similar results were obtained by Mukherjee and Suetrong (2009) and Dijkstra et al (2015).…”

Section: Fdi or Export With Governancesupporting

confidence: 89%

“…This result is similar to the finding of Mukherjee and Suetrong (2009) and Dijkstra et al (2015), who showed that when the foreign firm exports up to θ F < 1, the optimal degree of privatization is either θ F + ε or θ F . Besides, our findings further show that the optimal degree of privatization can either be θ f* (when θ F is sufficiently small) or θ x* (when θ F is sufficiently large).…”

Section: Welfare Analysissupporting

confidence: 89%

“…However, if the requirement for FDI is too high, then the host-country may not prefer to induce FDI through privatization. Dijkstra et al (2015) further built an international mixed oligopoly model to analyze the interaction between privatization and FDI with strategic policies and showed that the incentive for FDI increases with privatization, but the possibility of FDI reduces the degree of privatization. In their papers, the role of economic governance was not considered.…”

Section: Introductionmentioning

confidence: 99%

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Governance, privatization and foreign direct investment

Cai

Wang

2018

NBRI

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Purpose The purpose of this study is to investigate the interplay between economic governance and privatization, and how these two instruments affect the entry mode choice of the foreign firm and the social welfare of the host country. Design/methodology/approach This study constructs a mixed duopoly model wherein one domestic public firm competes with a foreign firm and investigates the influence of economic governance investment on the domestic government’s optimal degree of privatization choice and the foreign firm’s entry mode choice. Findings This study shows that (1) better economic governance enhances the effect of privatization on output, thus resulting in a lower degree of privatization; (2) the optimal privatization policy of the domestic government is partial privatization irrespective of the foreign firm’s entry mode choice; (3) with optimal investment by the domestic government on economic governance, the optimal degree of privatization is higher under FDI than export, and the host-country welfare is also higher under FDI. In particular, this study demonstrates that better economic governance decreases the threshold of the degree of privatization when the foreign firm switches from export to FDI, implying that better economic governance stimulates the foreign firm to undertake FDI in the host country. Practical implications The findings shed some light on both the mixed ownership reform of the SOEs in China and attracting foreign capital inflow to improve the host country’s social welfare. Originality/value To the best of the authors’ knowledge, this study constitutes the first attempt to build a theoretical framework to explore how the interactions between economic governance and privatization influence the entry mode choice of the foreign firm.

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Section: Welfare Analysissupporting

confidence: 89%

Section: Fdi or Export With Governancesupporting

confidence: 89%

Section: Welfare Analysissupporting

confidence: 89%

Section: Introductionmentioning

confidence: 99%

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Governance, privatization and foreign direct investment

Cai

Wang

2018

NBRI

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“…The study found evidence that further economic growth depends on further privatization and FDI. Bouwe R. Dijkstra, Anuj Joshua Mathew, and Mukherjee (2015) analyzed the interaction between privatization and FDI and found that privatization by the domestic country increases a foreign firm's incentive for FDI.…”

Section: Some Recent Empirical Studies Of the Fdi And Privatization Rmentioning

confidence: 99%

Analyzing the relationship between foreign direct investment and privatization in the European Union Founder Nations by using panel data approach

Tüzüntürk¹,

Inam²,

Giray³

2018

Panoeconomicus

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Foreign direct investment (FDI) and privatization are two of the most important components in liberalization World. The aim of this study is to analyze whether there exist a statistically significant relationship between FDI and privatization, or not. To do so, a panel data sample of fourteen European Union (EU) Founder Nations in 1998-2012 was used to estimate various panel data models. The special feature of panel data is that it allows researchers to construct and test more realistic behavioral models that could not be identified using crosssection or time series data alone. Based on the sample results, between privatization as the primary independent variable and FDI was found a statistically significant positive relationship. Although other explanatory variables such as growth, trade openness, and corruption perceptions index, were found to have statistically significant effects on FDI, budget deficit was found to be statistically insignificant. Moreover, statistically significant parameters' signs showed that all of the economic expectations were satisfied.

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Foreign competition and optimal privatization with excess burden of taxation

Lee¹,

Wang

2018

J. Econ.

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Privatization in the presence of foreign competition and strategic policies

Cited by 7 publications

References 26 publications

Governance, privatization and foreign direct investment

Governance, privatization and foreign direct investment

Analyzing the relationship between foreign direct investment and privatization in the European Union Founder Nations by using panel data approach

Foreign competition and optimal privatization with excess burden of taxation

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