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

Interdisciplinary European Studies

The European Union and the Return of the Nation State

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This book explores the complex and ever-changing relationship between the European Union and its member states. The recent surge in tension in this relationship has been prompted by the actions of some member state governments as they question fundamental EU values and principles and refuse to implement common decisions seemingly on the basis of narrowly defined national interests.

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