Signalling and entry deterrence: a multidimensional analysis

Bagwell, Kyle

doi:10.1111/j.0741-6261.2007.00106.x

Cited by 34 publications

(20 citation statements)

References 36 publications

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“…For instance, a firm can signal a product's quality in a host country by bearing the costs associated with foreign direct investment instead of using a less commitment-intensive mode of entry (Katayama & Miyagiwa, 2009). Other research in international economics has argued that advertising or securing export subsidies can work as signals and reduce adverse selection in foreign markets (e.g., Bagwell, 2007;Bagwell & Staiger, 1989).…”

Section: Background Theorymentioning

confidence: 99%

Signals and international alliance formation: The roles of affiliations and international activities

Reuer

Ragozzino

2014

J Int Bus Stud

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This paper extends signaling theory to the study of firms' international alliances. Signals can be valuable in facilitating these collaborations because they reduce the risk of adverse selection surrounding cross-border partnerships. We specifically investigate whether firms' affiliations with prominent financial intermediaries enable the formation of international collaborative agreements. We also argue and find that the signaling benefits of these affiliations diminish with the firm's engagement in international activities, which can function as alternative signals by which firms convey the quality of their resources and prospects. Examining firms' cross-border activities helps to identify new and important signals that are unique to the international setting. Moreover, this also helps contextualize prior theory and findings that exist in the domestic setting on the effects of affiliations with financial intermediaries such as venture capitalists and investment banks. We conclude that signaling theory offers a promising addition to existing theories of international alliances and other cross-border activities. We contrast some of the main arguments and predications of signaling theory with other theories used in international business, and we emphasize the research opportunities that exist for employing this perspective in international business studies in the future.

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Section: Background Theorymentioning

confidence: 99%

Signals and international alliance formation: The roles of affiliations and international activities

Reuer

Ragozzino

2014

J Int Bus Stud

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“…Engers (1987) andBagwell (2006) are the better known ones. 20 This case resembles the analysis in the industrial organization literature on advertising as a signal of quality and the limit pricing literature (in particular, there are similarities withMilgrom and Roberts (1986)).…”

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confidence: 99%

Sovereign defaults: Information, investment and credit

Sandleris

2008

Journal of International Economics

132

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Why would a sovereign government, immune from bankruptcy procedures and with few assets that could be seized in the event of a default, ever repay foreign creditors? And, correspondingly, why do foreign creditors lend to sovereigns? This paper finds general conditions under which, even in the absence of sanctions, lending to sovereigns can emerge in a single shot game. Furthermore, it shows that positive borrowing can be sustained both in pooling and separating equilibria. In this way, it makes clear that neither sanctions nor reputation considerations, the two classical explanations, are necessary to enforce repayment. Information revelation is the crucial mechanism for these results. The repayment/default decision is interpreted as a signal used by the government to communicate information to domestic and foreign agents about the fundamentals of the economy. Governments repay to affect agents' expectations about them. A default, through its effect on expectations about fundamentals, can generate a decline in foreign and domestic investment and a credit crunch in domestic credit markets. Governments repay to avoid these costs, but may default (in equilibrium) when hit by a negative shock.

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“…2 To scare o¤ entrants, a monopolist with private …rm-speci…c information could adopt a limit pricing strategy (charging a price below monopoly-price level) or aggressive advertising to signal its superior costs Harrington, 1986;Srinivasan, 1991;Bagwell, 2007;etc.). On the other hand, when the private information concerns a market-wide factor, the incumbent will prefer to deter entry by reporting bad news to indicate a lack of prospects.…”

Section: Introductionmentioning

confidence: 99%

“…3 Prior studies examine the e¤ect of conservatism on debt covenants. Venugopalan (2009) and Gigler et al (2009) show that conservatism does not improve debt-contracting e¢ ciency.…”

Section: Introductionmentioning

confidence: 99%

Market Exit Through Divestment—The Effect of Accounting Bias on Competition

Chen

Jørgensen

2018

Management Science

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We analyze the e¤ect of accounting bias on the competition and market structure of an industry. In our model, …rms'interim accounting reports on investment projects may contain bias introduced by the mandatory accounting system. We …nd that this bias strictly decreases …rms'pro…ts when investors do not have an abandonment option, but di¤erent results emerge when we allow the investors to divest in the interim. Speci…cally, a conservative accounting regime may increase the likelihood of projects being discontinued, inducing some …rms to exit from the product market and leaving rivals to capture their market share. A conservative regime can thus soften market competition and result in ex ante higher investment payo¤, higher consumer surplus, and higher total social welfare. Since industries often have common reporting standards, we also identify the degrees of industry-wide accounting bias that maximize the expected investor payo¤s. Finally, we allow for investors to coordinate their divestment decisions when both …rms report unfavorable costs and show an improvement to both …rm pro…ts and consumer surplus.

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Signalling and entry deterrence: a multidimensional analysis

Cited by 34 publications

References 36 publications

Signals and international alliance formation: The roles of affiliations and international activities

Signals and international alliance formation: The roles of affiliations and international activities

Sovereign defaults: Information, investment and credit

Market Exit Through Divestment—The Effect of Accounting Bias on Competition

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