Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 515: The Equilibrium Ownership of an International Oligopoly

Henrik Horn and Lars Persson ()
Additional contact information
Henrik Horn: World Trade Organization and Institute for International Economic Studies, Postal: Stockholm University, SE-106 91 Stockholm, Sweden
Lars Persson: The Research Institute of Industrial Economics, Postal: P.O. Box 55665, SE-102 15 Stockholm, Sweden

Abstract: Mergers and acquisitions (M&A) is the dominant form of Foreign Direct Investment (FDI), but has received but scarce attention in the theory literature on trade and investment. This paper highlights how the international pattern of ownership of productive assets may depend on features of trade and production costs. It suggests how high trade costs may be conductive to national ownership of assets, while international firms may arise at lower trade costs, contrary to what the "tariff jumping" argument would suggest. It also shows how private and social incentives for M&A may differ for weak merger synergies, but converge when synergies are stronger.

Keywords: International mergers; Endogenius market structure; Tariff jumping FDI

JEL-codes: F23; L13

35 pages, June 10, 1999

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