Foreign Investment, Vertical Integration and Local Equity Requirements
Bibliographic Data
| ID | 9723463 |
|---|---|
| Authors | Avik Chakrabarti (University of Wisconsin–Milwaukee), John S Heywood (0000-0001-9600-2462, University of Wisconsin–Milwaukee) |
| Year | 2004 |
| Volume | 71 |
| Issue | 284 |
| Pages | 559-574 |
| Publication date | 2004-11-01 |
| Peer Reviewed | Yes |
| Open Access | Yes |
| Type | ARTICLE |
| Venue | Economica (JOURNAL) |
| Journal identifiers | ISSN: 0013-0427 • E-ISSN: 1468-0335 |
| Publisher | Wiley (PUBLISHER • GB) |
| DOI | 10.1111/j.0013-0427.2004.00388.x |
| OpenAlex | W1999582950 |
| Language | EN |
| References cited | 16 |
The paper presents a spatial model in which a foreign firm and local government behave strategically in setting a local equity requirement (LER). Contrary to simple intuition, larger equity requirements may increase economic efficiency, but this conclusion is highly sensitive to the vertical structure of the foreign firm. When the foreign firm has monopoly power in both foreign (upstream) and domestic (downstream) markets, the optimal equity requirement is zero. Surprisingly, the introduction of domestic competition upstream causes the government to adopt a LER which lowers economic efficiency
Business · Economics · Equity (law) · Equity capital markets · Foreign direct investment · Industrial organization · International economics · Intuition · Macroeconomics · Market economy · Microeconomics · Monetary economics · Monopoly · Private equity · Upstream (networking) · Vertical Integration · Auction Theory and Applications · Economic Policies and Impacts · Finance · Merger and Competition Analysis
| Citation velocity | historical |
|---|---|
| Highly cited | No |