Gains from multinational competition for cross-border firm acquisition

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.

A consumer-surplus standard in foreign acquisitions, foreign direct investment, and welfare

“…In this case, fierce competition among multinationals for the acquisition of the local firm even may bid up the price to the extent that the multinationals would have been better off had they both undertaken greenfield investment. In such a case, it may turn out that the strategic use of a consumer welfare argument in regulating foreign market entry may lead to a prisoner's dilemma situation for the multinationals, although the results would still suggest a preemptive foreign takeover by the ex-post more efficient multinational in a non-cooperative equilibrium, and even greater local welfare for the host country (see Koska, 2018, for details).…”

Hakların Tükenmesi İlkesinin Coğrafi Sınırları, Paralel Ticaret ve Doğrudan Yabancı Yatırımlar

“…İlgili yazında sıklıkla karşılaşılan en temel sonuç, yatay DYY'nin sosyal refah üzerindeki belirsiz etkisidir. Eğer yatay DYY gerçekleştiren yabancı firmaların üretim maliyetleri yerel firmalara görece yeteri kadar düşükse ve yabancı firmaların piyasa girişleri yerel firmaları piyasa dışında atmıyorsa, yatay DYY sosyal refahı artırır; bkz., Koska (2018a;2018b). Bir sonraki bölümden de takip edilebileceği gibi paralel ticaret politikaları, DYY ve sosyal refah arasındaki etkilesim ekonomi politikası için önemli bir konudur.…”

The special issue on FDI and multinational corporations: an introduction

“…Historically, the theory of FDI is deeply rooted in the theory of industrial organization (see Antràs and Yeaple (2014) for a recent survey). The contribution of Onur Koska (2019) to this special issue can be seen in the context of this literature. Koska analyzes how government regulation in the form of a minimum output requirement affects foreign companies' choice of market entry -in particular, the choice between acquiring a domestic firm and serving the domestic market through exports.…”