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Modes of Foreign Entry under Asymmetric Information about Potential Technology Spillovers

Author

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  • Müller, Thomas

Abstract

This paper studies the effect of technology spillovers on the entry decision of a multinational enterprise into a foreign market. Two alternative entry modes for a foreign direct investment are considered: Greenfield investment versus acquisition. We find that with quantity competition a spillover makes acquisitions less attractive, while with price competition acquisitions become more attractive. Asymmetric information about potential spillovers always reduces the number of acquisitions independently of whether the host country or the entrant has private information. Interestingly, we find that asymmetric information always hurts the entrant, while it sometimes is in favor of the host country.

Suggested Citation

  • Müller, Thomas, 2002. "Modes of Foreign Entry under Asymmetric Information about Potential Technology Spillovers," Discussion Papers in Economics 12, University of Munich, Department of Economics.
    • Handle: RePEc:lmu:muenec:12
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    File URL: https://epub.ub.uni-muenchen.de/12/1/0208_mueller.pdf
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    More about this item

    Keywords

    Foreign direct investment ; multinational enterprise ; enty mode ; technology spillovers ; asymmetric information ; transition economies;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • P31 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions

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