basket cases tax incentives and international joint venture participation by american multinational firms abstract this paper examines the impact of the u s tax reform act of 1986 tra on international joint ventures by american firms the tra mandates the use of separate baskets in calculating foreign tax credits on dividends received from each foreign corporation owned 50 or less by americans which greatly reduces the attractiveness of joint ventures especially those in low tax foreign countries since the effect of the tra on joint ventures varies with foreign tax rates the country level pattern of subsequent joint venture activity illustrates the sensitivity of organizational form to tax considerations the evidence indicates that american participation in international joint ventures fell sharply after 1986 particularly in low tax countries moreover joint ventures in low tax countries use more debt and pay greater royalties to their american parents after 1986 reflecting their incentives to economize on dividend payments

increasing dominance with no efficiency effect abstract i uncover a new force towards increasing dominance the property whereby in dynamic games the leader tends to increase his or her lead in expected terms the new effect results from the strategic choice of covariance in races i assume that players must choose not the amount of resources to spend but how to allocate those resources i show that in equilibrium the laggard chooses a less promising path in effect trading off lower expected value for lower correlation with respect to the leader this results in increasing dominance and holds true even if no joint payoff or efficiency effect is present journal of economic literature classification numbers c7 l1

durable goods and product obsolescence the issue of product obsolescence is addressed by examining the optimal sales strategy of a monopolist firm that may introduce an improved version of its current product consumers expectations of a forthcoming product lowers the price that they are willing to pay for the current product because of its loss in value due to obsolescence the new product is characterized by consumers increased willingness to pay and by its competitive interaction with the old product these characteristics affect the tradeoff that the firm makes between the cost of waiting for new product sales versus the cost of cannibalizing these sales we analyze the effect of these characteristics of the new product on the firm s optimal sales strategy we consider the various policy measures available to the firm including limiting initial sales in order to lower cannibalization of the new product buying back the earlier version of the product in order to generate greater demand for the new product and announcements of future product introductions we find that for modest levels of product improvement the firm s optimal policy is to phase out sales of the old product while for large improvements a buy back policy is more profitable lastly we find that the firm is better off if it informs consumers whether a new product is forthcoming

reverse channel design the case of competing retailers the economical and environmental benefits of product remanufacturing have been widely recognized in the literature and in practice in this paper we focus on the interaction between a manufacturers reverse channel choice to collect postconsumer goods and the strategic product pricing decisions in the forward channel when retailing is competitive to this end we model a direct product collection system in which the manufacturer collects used products directly from the consumers e g print and copy cartridges and an indirect product collection system in which the retailers act as product return points e g single use cameras cellular phones we first examine how the allocation of product collection to retailers impacts their strategic behavior in the product market and we discuss the economic trade offs the manufacturer faces while choosing an optimal reverse channel structure when a direct collection system is used channel profits are driven by the impact of scale of returns on collection effort whereas in the indirect reverse channel supply chain profits are driven by the competitive interaction between the retailers subsequently we show that the buy back payments transfered to the retailers for postconsumer goods provide a wholesale pricing flexibility that can be used to price discriminate between retailers of different profitability

heuristics and biases in timing the replacement of durable products the process by which individuals make recurrent decisions about when to replace durable goods is examined two experiments are reported in which subjects play the role of purchasing agents who must repeatedly decide whether to keep a currently owned manufacturing device or replace it with a superior new one given uncertainty about the future performance of new and currently owned machines replacement patterns are compared with those that would be predicted if subjects made decisions as rational economic agents following the principles of optimal replacement theory this comparison reveals a number of systematic departures from optimality that do not vanish with experience among these are a tendency to replace at a slower rate than would be predicted by normative theory and a tendency to weigh opportunity costs arising from obsolescence greater than those arising from product deterioration in addition subjects display a bias against making replacement purchases given short lapses of time since the previous replacement the findings are interpreted in terms of known biases in decision making under uncertainty in dynamic and static settings

nonverifiability noncontractibility and ownership determination models in foreign direct investment with an application to foreign operations in japan abstract firms intangible assets are important inputs for their foreign operations inputs of intangible assets and the resulting output are often not contractible in that neither precise use of such inputs nor potential products which can be produced by taking advantage of such inputs can be completely delineated in a contract where such incomplete contracts prevail control of residual rights becomes essential for protecting firms intangible assets ownership is often used to control residual rights in international operations in this paper we present a few interrelated models of ownership determination for firms international operations we show that a firm s ownership share in its foreign operation reflects the importance of the firm s intangible assets used in the operation and the resulting bargaining power relative to its local partners we test our theoretical implications using data on foreign firms manufacturing operations located in japan our empirical results are consistent with theoretical predictions

trade ins and introductory offers in a monopoly we model the commonly used marketing practices of offering discounts to either repeat buyers trade ins or new buyers introductory offers of a quasi durable good we analyze these practices in terms of their potential for intertemporal and third degree price discrimination in our two period model the monopolist sets a first period price that segments the second period market optimally into holders and nonholders of the good in the second period different prices are quoted to the two market segments we present three versions of the model with varying assumptions on consumers rationality

bargaining power ownership and profitability of transnational corporations in developing countries as the bargaining power of the transnational corporations tncs in the sample increased relative to the bargaining power of the host country and as the desire of the tncs for a high level of equity ownership increased the percent equity ownership of the tncs in their subsidiaries increased the relationship between percent equity ownership and subsidiary success from the tncs viewpoint however was j shaped high and low levels of equity ownership were associated with high levels of success control of critical operational variables by the tnc was directly related to success

are firm specific advantages location specific too much of the research on the role of firm specific advantages on firms subsidiary ownership preferences has been undertaken in the context of advanced country multinationals specifically u s mncs research has found that u s firms derive ownership advantages from their size experience and technological and marketing superiority perhaps having operated in the most developed and sophisticated home market many u s firms generate unique skills that give them absolute advantages over firms in almost all foreign host locations developing country mncs do not have absolute ownership advantages similar to those of the u s firms the relevance of a particular firm specific characteristic for a developing country mnc may be contingent not only upon the home country characteristics as in the case of u s mncs but also upon host country characteristics this study investigates the subsidiary ownership preferences among korean mncs and finds that the influence of three firm specific advantages technological intensity product differentiation and capital intensity on subsidiary ownership levels is contingent upon whether the subsidiary is located in a relatively less developed or a more developed country as compared to the home country although some authors have suggested that the influence of firm specific advantages may be contingent upon the characteristics of both home and host country locations empirical investigations to this effect have been nonexistent

prior conditions and early international commitment the mediating role of domestic mindset our study investigates why some firms engage in low international commitments such as exports in the early phases of internationalization whereas others leapfrog the internationalization process and start with high international commitments in the form of foreign direct investment fdi process models of internationalization propose that firms start with low commitment activities and gradually increase their commitments to international markets however recent empirical evidence has shown that many firms make high international commitments from the start our findings suggest that domestic resources and competitive action propensity affect early international commitments indirectly through domestic mindsets a domestic mindset refers to the knowledge structures of the top management team prior to starting international activities based on their managerial experience and learning in domestic markets our results suggest that knowledge and learning gained in domestic markets through diverse resource and competitive activities may be crucial in early international commitments

the choice between joint venture and wholly owned subsidiary an institutional perspective the study of foreign entry mode choice has been based almost exclusively on transaction cost theory this theory focuses mainly on the impacts of firm and industry specific factors on the choice of entry mode taking the effects of country specific contextual factors as constant or less important in contrast the institutional perspective emphasizes the importance of the influence of both institutional forces embedded in national environments and decision makers cognitive constraints on the founding conditions of new ventures still this theoretical perspective has yet to provide insights into how institutional factors influence the choice of foreign entry mode the primary goal of the present study is to provide a unifying theoretical framework to examine this relationship we synthesize transaction cost and institutional perspectives to analyze a sample of 364 japanese overseas subsidiaries our results support the notion that institutional theory provides incremental explanatory power of foreign entry mode choice in addition to transaction cost theory in particular we found that multinational enterprises tend to conform to the regulative settings of the host country environment the normative pressures imposed by the local people and the cognitive mindsets as bounded by counterparts and multinational enterprises own entry patterns when making foreign entry mode choices

termination outcomes of research alliances abstract we draw upon evolutionary economics and transaction cost economics to examine how alliance experience accumulation at the parent firm level and alliance features at the transaction level jointly and interactively shape the favorability of research alliances termination outcomes fifteen percent of the terminated alliances we examined were successful 34 were failures and 51 experienced an intermediate outcome in the form of contract expiration or unilateral withdrawal by a partner we find that the effect of partner specific experience on the favorability of termination outcomes is greater for non equity alliances than for equity structures affording stronger formal governance mechanisms other forms of experience such as general alliance experience or prior alliances in the same technological area as the focal agreement have no such favorable consequences for alliance termination the findings also indicate that alliance complexity adversely influences firms termination outcomes in alliances we therefore find evidence in partial support of both evolutionary and transaction cost based arguments for the explanation of termination outcomes in research alliances

wholly owned subsidiary versus technology licensing in the worldwide chemical industry this paper empirically analyzes the determinants of the choice between wholly owned subsidiary and technology licensing as a strategy for expansion abroad we use a new and comprehensive database on worldwide plant level investments in the chemical industry during the 1981 1991 period we find that both cultural distance and the presence of other potential licensors favor the use of licensing as a strategy for expanding abroad whereas prior experience favors the choice of wholly owned subsidiary an implication of this study is that competition in the market for technology can foster the international diffusion of technology through the use of arm s length agreements

analyzing foreign market entry strategies extending the internalization approach a new fully integrated analysis of the foreign market entry decision is presented encompassing the choice between exporting licensing joint venturing and wholly owned foreign investment the choice between acquisition and greenfield investment is examined and so too are options based on subcontracting and franchising the model extends the insights of internalization theory and draws on concepts from the economics of industrial organization a special feature of the model is the distinction between investment in production facilities and investment in distribution facilities an important practical distinction that has been overlooked in much of the international business literature the strength of competition from indigenous rivals is emphasized as a determinant of entry strategy into both production and distribution

the effect of implementing trade in strategy on duopoly competition abstract we study a firm that makes new products in the first period and collects used products through trade in along with new product sale in the second period to conduct a convincing analysis we initially evaluate the problem in a duopoly situation in which one firm firm a implements trade in and the other one firm b does not we subsequently introduce the competitive environment in a two period planning horizon to identify thresholds that determine the trade in operations and then derive the equilibrium decisions of the resulting scenarios we characterize the optimal production quantities that are associated with parameter b the sum of used product salvage value and government subsidy in the nash equilibrium results indicate that adopting trade in could bring competitive advantage for firm a in terms of market share and profit if the new product sale is comparatively profitable then the trade in firm may forgo some of the collection margin by raising the trade in rebate and selling additional units to increase new product sale in the second period moreover the total collection quantity does not always increase with government subsidy we consequently expand the model to the case where both firms compete in trade in and derive the corresponding decision space of the duopoly firms finally we explore the effect of adopting trade in on consumer surplus and compare it in the two models

measuring globalization of industries using a national industry approach empirical evidence across five countries and over time this paper presents an objective measurement of industry globalization although crucial in understanding firm strategies industry globalization has been largely subjectively measured consisting of mostly case studies this research develops a two pronged measure of industry globalization based on a the extent of an industry s international linkages lit and b the integration of value added activities within the industry iit in addition of providing a quantitative equivalent to porter 1986 and bartlett and ghoshal s 1989 conceptual industry categorizations this measure permits the examination of important but previously untested notions regarding globalization using data for chemical and manufacturing industries for five major trading nations we find that 1 chemical industries are less global than manufacturing industries despite high levels of fdi found in chemical industries 2 u s globalization frequently assumed to be representative of worldwide globalization of industries is less than that of other major industrial countries and 3 industries in both sectors are globalizing over time consistent with the literature

partner contributions as predictors of equity share in international joint ventures the type of expertise that a company contributes to a joint venture may affect the amount of equity that it owns this research observes the ownership patterns associated with four common combinations of partner expertise in international joint ventures the results rank company assets with respect to the contributor s ability to negotiate majority ownership in the original joint venture contract and that company s tendency to buy up equity from the partner later on

foreign direct investment and host country policies a rationale for using ownership restrictions abstract this paper examines host governments motivation for restricting ownership shares of multinational firms mnfs in foreign direct investment fdi projects an mnf with a productivity advantage is willing to invest in a host country the host government wants to capture the mnf s surplus yet cannot observe it due to the mnf s private information about its firm specific advantage in contrast a joint venture jv partner might observe this surplus depending on its ownership share the host government can alleviate its informational constraints by using ownership restrictions to force a jv this calls into question the wisdom of calls for liberalizing fdi flows by the wholesale elimination of domestic jv requirements we show that the optimal mechanism involves ownership restrictions that decrease as the size of the mnf s firm specific advantage increases

host country policies and mne management control in ijvs evidence from china in international joint ventures ijvs partner firms exert three types of management control output process and social since management control critically influences ijv success it is essential to understand what factors drive the development of the control system prior studies have focused mainly on ijvs internal conditions and have largely neglected external institutional influences on ijv control in this study we explore how host country policies affect mne partners control over their ijvs using a sample of ijvs in china we find that mne partners tend to exercise less output and process control when minority equity restriction is present greater process control when they receive government incentives and less social control when they are required to partner with state owned enterprises in contrast the results of a post hoc analysis show that local partners control activities are not significantly influenced by these policies our findings provide new insights into ijv management by demonstrating the impacts of regulatory institutions on partners control activities

endogenous asset ownership structures in deregulated markets abstract this paper determines the equilibrium ownership structure in an emerging market deregulated by a joint privatization and investment liberalization it is shown that bidding competition in the privatization stage is not sufficient for reaching an efficient equilibrium market structure competition in the ensuing entry stage is also required otherwise one firm can induce another to take the role of the weak firm in the subsequent product market competition by making concessions in the bidding in the privatization auction it is also shown that employment guarantees may help the buyer of the privatized firm abstain from investing and thus create a less competitive market structure

performance and survival of joint ventures with non conventional ownership structures the international joint venture jv literature has focused on two parent jvs formed between one foreign and one local firm yet other types of jvs exist this paper identifies four distinct forms of jvs based on the jv partners nationality and equity affiliation these are i jvs that are formed between affiliated home country based firms ii jvs that are formed between unaffiliated home country based firmsl iii jvs that are formed between home country based and local firms and iv jvs that are formed between home country and third country based firms our analysis of 737 japanese jvs in asia demonstrates that the conventionally assumed form of jv represented only 30 percent of the total further each of the four jv forms significantly differed in terms of incidence performance and survival likelihood

pro market institutions and global strategy the pendulum of pro market reforms and reversals we review the literature analyzing the impact of pro market institutions on firms global strategy we propose that the ideological tension between whether the government or the market should drive economic development results in a pendulum of pro market reforms and reversals that drive changes in firm strategy and performance much progress has been made in the analyses of pro market reforms and their impact on firms international strategies and performance however there is a need to further learn about four areas 1 the concept of pro market institutions in particular the variety of institutional dimensions the measures and the influence of informal institutions on firm strategies 2 the drivers of changes in pro market institutions especially firms influences and the co evolution of firm strategies and institutional changes 3 the implications of changes in pro market reforms for the interactions among integration diversification and internationalization strategies the causality chains connecting institutions and strategies and the reconfiguration of activities globally and 4 the non traditional moderators that alter the impact of pro market institutional dynamics on firms strategies such as country level political systems industry level competitor reactions and individual level managerial capabilities and perceptions

demand for differentiated durable products the case of the u s computer printer market i introduction this paper aims to provide a theoretical and empirical description of consumer behavior in a dynamic market for differentiated durable goods the computer hardware industry serves as an example of the type of market we consider markets for computer systems and components as well as for many other high technology products exhibit some striking similarities that are of particular concern for an empirical economist as follows products are differentiated in multiple dimensions in addition to price products are durable yielding consumption services over multiple periods product quality rapidly improves over time empirical work on estimating differentiated product demand systems has been dominated by static discrete choice models with random utility see berry levinsohn and pakes 1995 goldberg 1995 and nevo 2001 among others however markets for durable goods exhibit several features at odds with their assumption of myopic consumer behavior first traditional static discrete choice models implicitly assume that consumers participate in the market every period choosing one of the available products or an outside option thus the fraction of consumers who do not buy any product in a given period could only be explained by the high value they assign to the outside alternative for durable goods however purchases are made infrequently and result in a consumer s exiting the market for a significant period of time hence the model needs to account for consumers outflow from the market arising from their purchase decisions second a static framework may give a misleading picture of the aggregate sales time pattern in a dynamic industry in many markets for durable products it is not uncommon to see rapidly improving product quality and falling prices given any reasonable set of consumer preferences over the product characteristics space static discrete choice models for such an industry will tend to predict an upward trend in aggregate sales this fails to account for a variety of patterns commonly seen in the data third the evolution of product quality leads to the possibility of intertemporal demand substitution by forgoing a current purchase the consumer retains the option to buy a potentially better product in the future hence the decision of when to buy may be just as important for consumers as the decision of what to buy this trade off cannot be accounted for in the static framework the purpose of this paper is to remedy these shortcomings of static discrete choice models in durable goods markets with particular attention paid to technological change and the dynamics of new products adoption the paper presents a dynamic model of consumer demand for differentiated durable products that explicitly accounts for consumers expectations of future product quality and consumers outflow from the market that arises endogenously from their purchase decisions in this model the consumer faces a sequence of static discrete choice problems over a non stationary choice set we show that for a subclass of random utility models which include the multinomial logit and the mcfadden 1978 generalized extreme value gev model there exists a scalar valued sufficient statistic that determines the value of the option to postpone the purchase this allows us to model industry evolution over a vastly reduced state space and to formalize the consumer s decision of when to buy as an optimal stopping problem a solution to that problem defines the hazard rate of product adoptions while the nested discrete choice model determines the alternative specific purchase probabilities integrating individual decisions over the population distribution generates rich dynamics of aggregate and product level sales the paper proceeds to present monte carlo evidence that ignoring the time dimension of consumer choice will induce a downward bias in the estimates of consumer preferences over quality sometimes reversing the sign of the coefficients

price competition in a capacity constrained duopoly abstract this paper characterizes the set of nash equilibria in a model of price setting duopoly in which each firm has limited capacity and demand is continuous and decreasing in general there is a unique equilibrium so that comparative static exercises are meaningful the properties of the equilibrium conform with a number of stylized facts the equilibrium prices are lower the smaller is demand relative to capacity when demand is in an intermediate range the firms use mixed strategies they randomly hold sales if capacities are chosen simultaneously before prices the set of equilibrium capacities coincides with the set of cournot quantities

social knowledge as a control system a proposition and evidence from the japanese fdi behavior building upon the concept of clans this paper introduces the value of social knowledge as a control mechanism available for an mnc to manage its foreign subsidiaries social knowledge is defined as one s ability to understand and predict others general patterns of behavior the hypotheses are empirically tested with japanese fdi data into four host countries the united states singapore taiwan and korea the results offer broad support for the proposition that for mncs with social knowledge the need to resort to ownership for control purposes is reduced

the effect of remanufacturing on procurement decisions for resellers in secondary markets the role of remanufacturing as a competitive tool for firms has been reflected in a number of studies to show that remanufacturing can reduce the unit cost of production by reusing components however the fact that remanufacturing can be used as a strategic tool for serving secondary markets as well has not been acknowledged in the literature in this paper we study the use of remanufacturing as a tool to serve secondary markets specifically we model the case of a reseller who procures used products based on an older generation of technology from an advanced market and then uses one of two options a she can either resell a small fraction of these used products in a developing market where the technology is acceptable or b she can invest in the remanufacturing of these products and then sell them in the developing market at a higher price the main result of the paper is that using remanufacturing to serve secondary markets reduces the number of units procured from the advanced market for the reseller in addition we show based on certain cost structures that the reseller is always better off if she uses remanufacturing to a certain extent

the strategic role of exchange promotions an exchange promotion allows consumers to turn in an old good and receive a discount toward the purchase of a new product the old good that is turned in can either be within the same category as the new good or it may be in a different category for example one can turn in an old cd player to count toward a new cd player a within category exchange or traditional trade in or toward a new television a cross category exchange this paper studies both within category and multicategory exchange promotions and analyzes their similarities and differences in a competitive setting with two firms we model exchange promotions and establish the equilibrium outcomes we find that categories in which consumers have a high level of waste aversion are more likely to have multicategory exchange promotions rather than within category or no promotions multicategory exchange promotions can increase both consumers replacement purchases and their new purchases interestingly we also find that strategic considerations can lead to a prisoner s dilemma outcome in which neither firm offers any kind of exchange promotion however waste aversion and multicategory exchange promotions can give firms stronger incentives to get out of the prisoner s dilemma outcome

ownership patterns of u s joint ventures abroad and the liberalization of foreign government regulations in the 1980s evidence from the benchmark surveys data from the benchmark surveys of the commerce department show the beginning of a global liberalization in government restrictions on foreign equity in the 1980s this was manifested in a small but unmistakable across the board reduction in the share of 50 50 and minority affiliates out of all u s affiliates in a country across countries there remains a huge variation in this proportion and the second part of the paper seeks to statistically explain this variation in a cross sectional regression analysis

bargaining power of multinationals and host governments one of the outcomes of negotiation between multinationals and host governments in developing countries the extent of foreign ownership of subsidiaries is influenced by the bargaining power of the two parties foreign ownership measured in various ways appears to be affected by the level of technology of the multinational the degree to which a multinational attempts to differentiate its products the extent to which a subsidiary s output is exported to other parts of the multinational the diversity of products offered by the multinational and the extent of competition by other multinationals the relationship between some of these variables and ownership is not a simple one one variable that others have mentioned as probably affecting bargaining power size of the investment in question appears not to play a significant role in government policies toward ownership but many large projects tend to be located in countries that have lenient ownership policies

the relation between price and marginal cost in u s industry an examination of data on output and labor input reveals that some u s industries have marginal cost well below price the conclusion rests on the finding that cyclical variations in labor input are small compared with variations in output in booms firms produce substantially more output and sell it for a price that exceeds the costs of the added inputs the paper documents the disparity between price and marginal cost where marginal cost is estimated from annual variations in cost it considers a variety of explanations of the findings that are consistent with competition but none is found to be completely plausible

the failing firm defense this paper evaluates the welfare consequences of the failing firm defense ffd in the eu and u s merger laws to this end i combine an oligopoly model with an endogenous valuations auction model the ffd is shown to work reasonably well for consumers unless small firms are too small the ffd may however lead to total surplus losses due to a least danger to competition ldc condition which favors small and thus possibly inefficient firms it is also shown that in a multi firm setting the ffd increases the incentive for predation only when the assets are industry specific

optimal strategies for trade old for remanufactured programs receptivity durability and subsidy due to its environmental financial and marketing benefits businesses and governments have increasingly embraced remanufacturing however the weak demand for remanufactured reman product severely hinders the implementation of remanufacturing lately trade old for remanufactured tor programs are growing in popularity as they can boost reman product demand in this paper we investigate the conditions when a firm should offer a tor program and how to best implement it our main findings are 1 firms should offer tor programs only when reman product receptivity and new product durability satisfy a certain condition 2 in addition to the reman product receptivity the new product durability also plays a significant role in motivating consumers to participate in tor programs and finally 3 high product remanufacturability and government subsidies are strong incentives for firms to offer their tor programs our analysis provides insights for firms and governments on how to use tor programs to benefit businesses consumers and the environment

government intervention in less developed countries the experience of multinational companies it is a fact of international business that governments intervene in the operations of foreign direct investors these government actions create a high level of uncertainty in international planning and are very costly to the foreign investor it appears however that not all firms experience the same degree of intervention within almost all nations the government appears to intervene in some foreign companies more than in others at one extreme some firms are forced out of the nation while at the other extreme firms tend to grow and prosper the purpose of this paper is first to explain these different experiences of foreign firms and then to address the question how can foreign firms reduce the amount of intervention they experience the conclusions are based on the intervention histories of more than 100 firms

structuring international cooperative ventures we examine the effect of bargaining power and informational asymmetry on the design of international cooperative ventures in the presence of restrictions on equity participation and investment when the bargaining advantage rests with the multinational equity participation restrictions can increase the profits to domestic firms and encourage sub optimal investment policies overinvestment occurs when the multinational s bargaining advantage is reinforced by an informational advantage while underinvestment occurs when the domestic firm possesses the informational advantage in contrast when the bargaining advantage rests with the domestic firm equity participation restrictions do not affect investment levels

the influence of firm s size and international experience on the ownership structure of italian fdi in manufacturing the literature on foreign direct investment fdi has analysed the entry mode choice by multinational enterprises mnes from several theoretical viewpoints nevertheless previous studies have mainly focused on the behaviour of large and established mnes while little attention has been given to small and medium sized firms the paper aims at providing further empirical evidence on the role of firm size and international experience in influencing the ownership structure of fdi the main hypothesis is that smaller firms characterised by financial and managerial con straints as well as firms lacking experience in managing foreign operations suffer from a condition of adverse asym metry in information costs compared to their competitors therefore they are forced to act prudently minimising risk and thus preferring a less control arrangement of foreign sub sidiaries a binomial logistic model is developed with reference to manufacturing foreign direct investments undertaken by italian firms in the period 1986 1993

tradable emission rights and strategic interaction the use of tradable emission rights as environmental policy instruments may affect the conditions for strategic interaction between regulated firms and thus have implications for competition policy this paper presents an analysis of how and under what conditions emission rights can be used strategically by oligopolistic firms for predatory and exclusionary purposes

influences on foreign equity ownership level in joint ventures in china this study examines the determinants of foreign equity ownership in joint ventures in china drawing upon duning s ownership locational and internalization paradigm and the literature on bargaining power eleven variables that impact foreign ownership preferences and concessions are examined these variables are advertising intensity foreign capital input country risk of china ejv investment amount ejv contractual duration cultural distance competitive intensity local partner state ownership local partner alignment foreign partner alignment and ejv location the empirical findings are largely consistent with the hypotheses the empirical findings are largely consistent with the hypotheses further interesting differences were found among u s european and japanese firms with respect to the impact of these determinants

enhancing the obsolescing bargain theory a longitudinal study of foreign ownership of u s and european multinationals this research attempts to enhance the obsolescing bargain theory for manufacturing companies by statistically testing the effects of nine explanatory variables on the static and dynamic manifestations of bargaining success with longitudinal firm level data in order to highlight those effects it develops a conceptual framework that provides a broader context in which the primary variables operate it demonstrates that the obsolescing bargain took effect in india over a fifteen year period following restrictive legislation unlike previous research this study measures the effect of benefits received by multinationals from the host government in exchange for equity dilution american companies are found to retain a smaller share of their foreign ownership over time than british and other european multinationals some explanatory variables that have previously been found to influence level of foreign ownership static bargaining success are found to be less important or have a different effect in explaining proportion of foreign ownership retained dynamic bargaining success

choosing the right exchange old for new programs for durable goods with a rollover abstract by offering to trade in one unit of old product at a discounted price while selling new products exchange old for new eon programs have been considered efficient ways of expanding market for durable goods starting from the choice behavior of customers this paper studies optimal pricing and remanufacturing decisions for firms that adopt the eon program specifically considering a supply chain that consists of one manufacturer and one retailer we investigate two business models i in the manufacturer initiated scenario the manufacturer launches an eon program and owns all the old items that are returned he remanufactures all or a portion of the old items and sells them to a secondary market ii in the retailer initiated scenario any old items that are returned belong to the retailer she remanufactures the old items and sells them to the secondary market an in depth comparison between the optimal decisions in the two models is conducted in this paper we show it is possible that a firm may be even more profitable from being a free rider instead of offering an eon program by himself herself based on a centralized supply chain as a benchmark an exchange discount sharing contract is proposed to coordinate the supply chain and to improve the overall welfare of customers numerical experiments are conducted to show the profit impact for the supply chain members which uncover some interesting managerial insights for the proper adoption of the most efficient eon programs

learning dynamics in research alliances a panel data analysis the aim of this paper is to empirically test the determinants of research joint ventures rjvs group dynamics we develop a model based on learning and transaction cost theories which represent the benefits and costs of rjv participation respectively according to our framework firms at each period in time weigh the benefits against the costs of being an rjv member rjv dynamics can then be interpreted as a consequence of this evolving trade off over time we look at entry turbulence and exit in rjvs that have been set up under the us national cooperative research act which allows for certain antitrust exemptions in order to stimulate firms to co operate in r d accounting for unobserved project characteristics and controlling for inter rjv interactions and industry effects the tobit panel regressions show the importance of group and time features for an rjvs evolution we further identify an average rjvs long term equilibrium size and assess its determining factors ours is a first attempt to produce robust stylized facts about co operational short and long term dynamics a neglected dimension in research co operations but an important element in understanding how collaborative learning works

foreign direct investment in hungary resource acquisition and domestic competitive advantage this paper examines the impact of foreign direct investment on the marketing resources and capabilities of firms in hungary foreign direct investment into hungary has been substantial in recent years and is credited as a major factor in leading the transition towards a market led economy while the motives of foreign investors to invest and of governments to attract investment have been extensively addressed in the literature there has been little research on the reasons why individual host firms seek to attract investment this paper develops a theoretical explanation of host firm motives through the resource based theory of the firm proposing that host firms seek resources from their investors that can then be deployed to create competitive advantage over rivals in the domestic market a series of specific propositions are developed and tested empirically on a large sample of hungarian enterprises

collusion versus differential efficiency testing alternative hypotheses the predictions of collusion and efficiency based static equilibrium explanations of interindustry profitability differences are formally developed and tested using appropriate econometric techniques with intraindustry data on seventy u s internal revenue service minor manufacturing industries in 1963 and 1972 none of the explanations has much explanatory power the 1963 data are consistent with collusion based models while the 1972 data are inconsistent with all non null hypotheses considered patterns of profitability are sharply different in the two years in complex ways apparently unrelated to cyclical forces or the phase ii price controls implications of these results are discussed copyright 1987 by blackwell publishing ltd

managing new and remanufactured products we study a firm that makes new products in the first period and uses returned cores to offer remanufactured products along with new products in future periods we introduce the monopoly environment in two period and multiperiod scenarios to identify thresholds in remanufacturing operations next we focus our attention on the duopoly environment where an independent operator io may intercept cores of products made by the original equipment manufacturer oem to sell remanufactured products in future periods we characterize the production quantities associated with self selection and explore the effect of various parameters in the nash equilibrium among other results we find that if remanufacturing is very profitable the original equipment manufacturer may forgo some of the first period margin by lowering the price and selling additional units to increase the number of cores available for remanufacturing in future periods further as the threat of competition increases the oem is more likely to completely utilize all available cores offering the remanufactured products at a lower price

the snowball effect abstract many economists think that dominant positions unprotected by strategic or operating advantages will tend to decay i demonstrate that that intuition is flawed by devising a model of noncooperative duopoly in which the initially larger competitor monopolizes all investment opportunities even though it is no more efficient than its smaller rival as part of an effort to push up output prices i also present an apparent example of this mechanism at work and discuss the implications for public policy

information costs and location of fdis within the host country empirical evidence from italy the literature on foreign direct investments fdis has analysed the location strategies of multinational enterprises across national borders but there have been few studies of location decisions by foreign investors within the borders of a single country the paper argues that the driving factors of these location choices have differing influences on indigenous and foreign investors specifically foreign investors suffer from a condition of adverse asymmetry in information costs compared to insiders thus foreign investors decisions on the location of their activities within a host country mainly reflect a rational responses to the existence of information costs

balancing private and state ownership in emerging markets telecommunications infrastructure country industry and firm influences bargaining between host states and investors over the terms of investment in sensitive sectors of the economy generates political and economic tensions in this study we investigate the factors that contribute to the outcomes of those negotiations as measured by the private vs state owned share of newly consummated telecommunications infrastructure projects we find that private ownership is positively associated with overall economic development and investment liberalization in the host country and with greenfield vs divestiture and joint venture vs wholly owned projects private ownership is negatively associated with existing telecommunications infrastructure higher levels of state ownership of foreign investing firms and the technological sophistication of the projects our analysis also shows a curvilinear inverted u shaped relationship between investment policy hazards and private ownership this finding supports the insight from transaction cost economics that potential gains from internalization are greatest at intermediate levels of uncertainty

optimizing product launches in the presence of strategic consumers a technology firm launches newer generations of a given product over time at any moment the firm decides whether to release a new version of the product that captures the current technology level at the expense of a fixed launch cost consumers are forward looking and purchase newer models only when it maximizes their own future discounted surpluses we start by assuming that consumers have a common valuation for the product and consider two product launch settings in the first setting the firm does not announce future release technologies and the equilibrium of the game is to release new versions cyclically with a constant level of technology improvement that is optimal for the firm in the second setting the firm is able to precommit to a schedule of technology releases and the optimal policy generally consists of alternating minor and major technology launch cycles we verify that the difference in profits between the commitment and no commitment scenarios can be significant varying from 4 to 12

structural stability and reconfiguration of international joint ventures previous research suggests that international joint ventures ijvs are inherently unstable and fragile this view has failed however to explain why many ijvs have an extended longevity and stability this paper draws on two contrasting perspectives from organization theory structural instability and structural inertia to trace both the destabilizing and stabilizing forces in ijvs and argues that a complete understanding of an ijv s dynamic evolution requires consideration of both forces