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Market Structure and the Multinational Enterprise: A Game-theoretic Approach1

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  • Edward M Graham

    (Institute for International Economics)

Abstract

Since at least the late 1950s, it has been recognized that multinational enterprises operate in imperfect markets characterized by oligopoly. The dominant “transactions-cost” theory of multinational enterprises does not wholly account for why this is so. The reductio ad absurdum of this theory would predict imperfect markets to be sure, but they would be monopolistic rather than oligopolistic. In this article, a simple model based on noncooperative game theory shows how oligopolistic markets can evolve from monopolistic ones. Also shown is that it is neither necessary nor sufficient that a firm have lower costs than its rivals in order to have an incentive to become multinational.© 1998 JIBS. Journal of International Business Studies (1998) 29, 67–83

Suggested Citation

  • Edward M Graham, 1998. "Market Structure and the Multinational Enterprise: A Game-theoretic Approach1," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 29(1), pages 67-83, March.
    • Handle: RePEc:pal:jintbs:v:29:y:1998:i:1:p:67-83
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    Citations

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    Cited by:

    1. Keith Head & Thierry Mayer & John Ries, 2002. "Revisiting Oligopolistic Reaction: Are Decisions on Foreign Direct Investment Strategic Complements?," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 11(3), pages 453-472, September.
    2. Head, K. & Mayer, T. & Ries, J., 2000. "Revisiting Oligopolistic Reaction : Are FDI Decisions Strategic Complements?," Papiers d'Economie Mathématique et Applications 2000.49, Université Panthéon-Sorbonne (Paris 1).
    3. Elizabeth L. Rose & Kiyohiko Ito, 2009. "Past Interactions and New Foreign Direct Investment Location Decisions," Management International Review, Springer, vol. 49(5), pages 641-669, October.
    4. Zhiqi Chen & Thomas W. Ross, 2009. "Credible Retaliatory Entry And Strategic Toe‐Holds," Journal of Industrial Economics, Wiley Blackwell, vol. 57(2), pages 343-352, June.
    5. repec:spo:wpmain:info:hdl:2441/c8dmi8nm4pdjkuc9g8o1o6tag is not listed on IDEAS
    6. Zhou, Dongsheng & Vertinsky, Ilan, 2002. "Can protectionist trade measures make a country better off? A study of VERs and minimum quality standards," Journal of Business Research, Elsevier, vol. 55(3), pages 227-236, March.
    7. Fiona Kun Yao & Ming-Jer Chen & Jiatao Li & Danielle Combs & Qiang Li, 2024. "A review of 50 years of research since Knickerbocker (1973): competitive dynamics in international business," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 55(5), pages 522-550, July.
    8. repec:spo:wpecon:info:hdl:2441/c8dmi8nm4pdjkuc9g8o1o6tag is not listed on IDEAS
    9. repec:hal:wpspec:info:hdl:2441/c8dmi8nm4pdjkuc9g8o1o6tag is not listed on IDEAS
    10. Edward M. Graham, 2001. "Subsidies, Market Closure, Cross-Border Investment, and Effects on Competition: The Case of FDI in the Telecommunications Sector," Working Paper Series WP01-2, Peterson Institute for International Economics.
    11. Ott, Ursula F., 2013. "International Business Research and Game Theory: Looking beyond the Prisoner's Dilemma," International Business Review, Elsevier, vol. 22(2), pages 480-491.
    12. repec:hal:spmain:info:hdl:2441/c8dmi8nm4pdjkuc9g8o1o6tag is not listed on IDEAS
    13. Dunning, John H., 2000. "The eclectic paradigm as an envelope for economic and business theories of MNE activity," International Business Review, Elsevier, vol. 9(2), pages 163-190, April.

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