Working Paper No. 515

The Equilibrium Ownership of an International Oligopoly

Published: June 10, 1999Pages: 35Keywords: International mergers, Endogenous market structure, Tariff jumping FDIJEL-codes: F23, L13

The Equilibrium Ownership of an International Oligopoly Henrik Horn and Lars Persson


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.

Henrik Horn

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Ph: +46 8 665 4540
henrik.horn@ifn.se

Lars Persson

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Ph: +46 8 665 4504
lars.persson@ifn.se

An Agenda for Europe

Institutional Reform for Innovation and Entrepreneurship

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The authors of this book, Niklas Elert, Magnus Henrekson and Mikael Stenkula, advise the economies of the European Union to become more entrepreneurial in promoting innovation and economic growth. The authors propose a reform strategy with respect to several aspects to achieve this goal.

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