برادری رقابت: سرمایه گذاری مستقیم خارجی و ادغام شرکت های داخلی
|کد مقاله||سال انتشار||تعداد صفحات مقاله انگلیسی||ترجمه فارسی|
|9448||2009||7 صفحه PDF||سفارش دهید|
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Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : International Review of Economics & Finance, Volume 18, Issue 1, January 2009, Pages 63–69
We examine the effects of mergers on Foreign Direct Investment (FDI), and on shaping national policies regarding FDI. In this work we develop a partial equilibrium model of an oligopolistic industry in which a number of domestic and foreign firms compete in the market for a homogeneous good in a host country. It is assumed that the number of foreign firms is endogenous and can be affected by the government policy in the host country. The government sets the policy (subsidies) to maximise social welfare. We allow domestic mergers. Our main results suggest that when the host country government imposes discriminatory lump-sum subsidy in favor of foreign firms, a merger of domestic firms will increase the number of FDI if the subsidy level is exogenous. With an endogenous level of subsidy, a merger of domestic firms will decrease (increase) the welfare if the domestic firms are more (less) efficient.
According to UNCTAD (2000), cross-border M&A (Mergers and Acquisitions) was the main force behind the major rise of Foreign Direct Investment (FDI) around 2000. During the period between 1990 and 2000, most of the growth in international production has been via cross-border M&As rather than greenfield investment. The total number of all M&As worldwide (cross-border and domestic) has grown at 42% annually between 1980 and 1999. The value of all M&As (cross-border and domestic) as a share of world GDP has risen from 0.3% in 1980 to 8% in 1999 UNCTAD (2000). Governments' policy measures regulating M&A activities affect the welfare of billions of consumers, as discussed in Benchekroun and Chaudhuri (2006), as well as the welfare of other economic agents such as employees and employers. For example, Bhattacharjea (2002) claims that if foreign mergers and export cartels can be treated as a reduction in the effective number of foreign firms, this can actually reduce home welfare below the autarky level, as the free-rider benefits that greater concentration bestows on domestic firms who are not party to the merger are insufficient to compensate for the loss inflicted on domestic consumers. This is a very serious regulatory issue in the world economy. The countries should pursue local and international policies in order to regulate possible unfair competitive strategies in case of mergers. This question has been addressed by Bhagwati (1991), Gatsios and Seabright (1990) and Neven (1992). These researches claim that the regulatory policies should be subject to international negotiations or assigned to higher levels of government.1 Bulk of the studies in the literature analyse the affect of foreign mergers on welfare. Domestic firms also merge for several reasons, for instance in order to obtain competitive advantage against foreign rivals. Mergers of domestic firms appear to be a surviving strategy. Following this line, Collie (1997) develops a significant paper on mergers of local and foreign firms and trade policy under oligopoly. Ross (1988) shows that a domestic merger driven by fixed cost-savings leads to lower price increases in the face of unilateral tariff reduction than otherwise. In a two country oligopolistic model, Long and Vousden (1995) show that bilateral tariff reductions increase the profitability of a domestic merger when the asymmetry between the merging firms is large enough. Benchekroun and Chaudhuri (2006) show that trade liberalization always increases the profitability of a domestic merger (regardless of the cost-savings involved). Espinosa and Kayalica (2007) analyse the interface between environmental policies and domestic mergers externalities. Despite these works, domestic mergers have been an issue not explored enough by the economic literature. As an important element of global economic activity, FDI has received enormous attention from scholars worldwide.2 This includes the issue of increasing competition amongst countries trying to attract FDI. The Trade Related Investment Measures (TRIM) agreement that is based on the GATT principles on trade in goods and regulates foreign investment, does not govern the entry and treatment regulations of FDI, but focuses on the discriminatory treatment of imported and exported products and not the services. This suggests that national governments can encourage or discourage foreign investors in a discriminatory manner by choosing the policy tools that do not have a direct effect on international trade. In this work, we develop a partial equilibrium model of an oligopolistic industry in which a number of domestic and foreign firms compete in the market for a homogeneous good in a host country. It is assumed that the number of foreign firms is endogenous and can be affected by government policy in the host country. The host country government uses lump-sum profit subsidies to attract FDI. The government sets the policy to maximise social welfare. The most important feature of the model is to allow mergers of domestic firms and to analyse the flow of foreign firms going into/out of the host country. This distinguishes our model from the previous works mentioned above. Under the above specification, we examine the optimal policies. The basic structure is given in the next section. In Section 3 we determine the optimal lump-sum subsidy which is used in a discriminatory fashion in favor of FDI. Later in this section we analyse the effect of domestic mergers on welfare once the optimal policy has been set. The effect of domestic mergers on FDI is examined in Section 4. For the above scenario, we also investigated the response of government's reaction to mergers when merger creates a negative externality on welfare. We conclude in the last section.
نتیجه گیری انگلیسی
This paper considers a case where foreign firms locate themselves in a host country and compete with domestic firms in an oligopolistic market of homogeneous goods. The government designs lump-sum subsidies (taxes) toward firms in the market. The number of domestic firms is assumed to be fixed whereas the number of foreign firms is endogenous. The government can affect the number of foreign firms by changing the level of subsidy. We analyse the case when the subsidy is used in a discriminatory fashion in favor of FDI. The government is assumed to maximise the social welfare. The model's main objective aim is to study the effect on welfare of the domestic mergers. Merger is modeled as an exogenous reduction in the number of firms. Finally, we investigate the response of government's reaction to mergers when merger creates a negative externality on welfare. Under this framework, we find that in the absence of any policy toward domestic firms, the optimal lump-sum profit subsidy to foreign firms is negative. Given this, our main result suggests that a domestic merger will increase the number of foreign firms if the optimal subsidy is exogenously given. The framework also let us to find that when the host country government imposes discriminatory lump-sum subsidy in favor of foreign firms, a merger of domestic firms will provide the following results if the subsidy is endogenous. The effect on the number of FDI may be negative or positive mainly depending on the relative efficiency of domestic and foreign firms. A domestic merger will increase the FDI inflow, if domestic firms are more efficient than foreign firms. It will decrease the number of FDI otherwise.