Endogenous Market Structure and Foreign Market Entry

30 Pages Posted: 11 Jan 2010

See all articles by James R. Markusen

James R. Markusen

University of Colorado at Boulder - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Frank Stähler

affiliation not provided to SSRN

Multiple version iconThere are 2 versions of this paper

Date Written: November 2009

Abstract

Models dealing with cross-border acquisitions versus greenfield investment usually assume that the entry of a foreign firm into a market has effects on the outputs of all domestic firms in that market, but exit or entry of local firms is not considered. The purpose of this paper is to re-examine the acquisition versus greenfield versus exporting question under fixed versus free entry assumptions for local firms. Our finding is that greenfield entry and exporting options are more attractive relative to acquisition when the local market structure adjusts to foreign entry through local entry or exit than when it is fixed. The entering foreign firm may do better or worse under free entry versus a fixed market structure depending on its optimal choice under the latter assumption.

Keywords: Cross-border acquisitions, endogenous market structures, foreign direct investment, multinational firms

JEL Classification: F12, F23

Suggested Citation

Markusen, James R. and Stähler, Frank, Endogenous Market Structure and Foreign Market Entry (November 2009). CEPR Discussion Paper No. DP7567. Available at SSRN: https://ssrn.com/abstract=1533172

James R. Markusen (Contact Author)

University of Colorado at Boulder - Department of Economics ( email )

Campus Box 256
Boulder, CO 80309
United States
303-492-0748 (Phone)
303-492-8960 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Frank Stähler

affiliation not provided to SSRN ( email )

No Address Available

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