International Expansion, Diversification and Regulated Firm Nonmarket Strategy

Managerial & Decision Economics. Sept. 2013, Vol. 34 Issue 6, p. 379-396

HEC Paris Research Paper No. SPE-2013-989

41 Pages Posted: 18 Jul 2013

See all articles by Santiago Urbiztondo

Santiago Urbiztondo

National University of La Plata and FIEL, Argentin

Jean-Philippe Bonardi

University of Lausanne

Bertrand V. Quelin

HEC Paris - Strategy & Business Policy

Date Written: December 21, 2012

Abstract

Previous studies have shown that regulated firms diversify for reasons that are different than for unregulated firms. We explore some of these differences by providing a theoretical model that starts by considering the firm-regulator relationship as an incomplete information issue, in which a regulated incumbent has knowledge that the regulator does not have, but the firm cannot convey hard information about this knowledge. The incumbent faces both market and nonmarket competition from a new entrant. In that context, we show that when the firm faces tough nonmarket competition domestically, going abroad can create a mechanism that makes information transmission to the regulator more credible. International expansion can thus be a way to solve domestic nonmarket issues in addition to being a catalyst for growth.

Keywords: Regulation, nonmarket strategy, international investments, diversification

Suggested Citation

Urbiztondo, Santiago and Bonardi, Jean-Philippe and Quélin, Bertrand V., International Expansion, Diversification and Regulated Firm Nonmarket Strategy (December 21, 2012). Managerial & Decision Economics. Sept. 2013, Vol. 34 Issue 6, p. 379-396; HEC Paris Research Paper No. SPE-2013-989. Available at SSRN: https://ssrn.com/abstract=2294318

Santiago Urbiztondo

National University of La Plata and FIEL, Argentin ( email )

Av. Cordoba 637
Buenos Aires
Argentina
(54-1) 314-1990 (Phone)
(54-1) 314-8648 (Fax)

Jean-Philippe Bonardi

University of Lausanne ( email )

Lausanne, Vaud CH-1015
Switzerland

Bertrand V. Quélin (Contact Author)

HEC Paris - Strategy & Business Policy ( email )

Jouy-en-Josas Cedex, 78351
France

HOME PAGE: http://www.hec.fr/quelin

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