nep-com New Economics Papers
on Industrial Competition
Issue of 2009‒11‒14
25 papers chosen by
Russell Pittman
US Department of Justice

  1. Strategic Supply Function Competition with Private Information By Xavier Vives
  2. Beyond the Need to Boast: Cost Concealment Incentives and Exit in Cournot Duopoly By Jos Jansen
  3. Bilateral oligopoly and quantity competition By Alex Dickson; Roger Hartley
  4. On Pricing and Vertical Organization of Differentiated Products By Shi, Guanming; Chavas, Jean-Paul
  5. Asymmetric price effects of competition By Lach, Saul; Moraga, Jose L.
  6. Input Production Joint Venture By Gianpaolo Rossini; Cecilia Vergari
  7. Outsourcing and Vertical Integration in a Competitive Industry By Ciliberto, Federico; Panzar, John
  8. Competition in two-sided markets with common network externalities By Bardey, David; Cremer, Helmuth; Lozachmeur, Jean-Marie
  9. Platform competition, compatibility, and social efficiency By Casadesus-Masanell, Ramon; Ruiz-Aliseda, Francisco
  10. Foreclosing competition through access charges and price discrimination By Lopez, Angel L.; Rey, Patrick
  11. Dynamics in Non-Binding Procurement Auctions with Boundedly Rational Bidders By Domenico Colucci; Nicola Doni; Vincenzo Valori
  12. Ownership structure, profit maximization, and competitive behavior By Vroom, Govert; Mccann, Brian T.
  13. Do Target CEOs Sell Out Their Shareholders to Keep Their Job in a Merger? By Bargeron, Leonce L.; Schlingemann, Frederik P.; Stulz, Rene M.; Zutter, Chad J.
  14. Does partner type matter in R&D collaboration for product innovation? By Ki H. Kang; Jina Kang
  15. R&D Productivity and Intellectual Property Rights Protection Regimes By Joanna Poyago-Theotoky; Khemarat Talerngsri Teerasuwannajak
  16. World Markets for Mergers and Acquisitions By Erel, Isil; Liao, Rose C.; Weisbach, Michael S.
  17. An Analysis of the Inward Cross-border Mergers and Acquisitions in the UK: A Macroeconomic Perspective By Agyenim Boateng; Ruthira Naraidoo; Moshfique M. Uddin
  18. Credit Risk Transfer and Bank Competition By Hendrik Hakenes; Isabel Schnabel
  19. A Contest Model of a Professional Sports League with Two-Sided Markets By Helmut Dietl; Tobias Duschl; Egon Franck; Markus Lang
  20. The Welfare Effects of Ticket Resale By Phillip Leslie; Alan Sorensen
  21. The Effect of Relaxation of Entry Restrictions for Large-Scale Retailers on SME Performance: Evidence from Japanese Retail Census By MATSUURA Toshiyuki; SUGANO Saki
  22. Economies of Scale in Production versus Diseconomies in Transportation: On Structural Change in the German Dairy Industry By Ole Boysen; Carsten Schröder
  23. Global integration of European tuna markets By Ramòn Jiménez-Toribio; Patrice Guillotreau; Rémi Mongruel
  24. Mergers and Acquisitions in Vietnam’s Emerging Market Economy, 1990-2009 By Quan-Hoang Vuong; Tran Tri Dung; Thi Chau Ha NguyenN
  25. FDI, R&D and Innovation Output in the Chinese Automobile Industry By Chen, Fang; Mohnen, Pierre

  1. By: Xavier Vives (IESE Business School and UPF)
    Abstract: A finite number of sellers (n) compete in schedules to supply an elastic demand. The costs of the sellers have uncertain common and private value components and there is no exogenous noise in the system. A Bayesian supply function equilibrium is characterized; the equilibrium is privately revealing and the incentives to acquire information are preserved. Price-cost margins and bid shading are affected by the parameters of the information structure: supply functions are steeper with more noise in the private signals or more correlation among the costs parameters. In fact, for large values of noise or correlation supply functions are downward sloping, margins are larger than the Cournot ones, and as we approach the common value case they tend to the collusive level. Private information coupled with strategic behavior induces additional distortionary market power above full information levels and welfare losses which can be counteracted by subsidies. As the market grows large the equilibrium becomes price-taking, bid shading is of the order of 1/n, and the order of magnitude of welfare losses is I/n^2. The results extend to demand schedule competition and a range of applications in product and financial markets are presented.
    Keywords: Reverse auction, Demand schedule competition, Market power, Adverse selection, Competitiveness, Rational expectations, Collusion, Welfare
    JEL: L13 D44 D82 G14 L94 E58 F13
    Date: 2009–10
  2. By: Jos Jansen (Max Planck Institute for Research on Collective Goods, Bonn)
    Abstract: This paper studies the incentives for production cost disclosure in an asymmetric Cournot duopoly. Whereas the efficient firm (consumers) prefers information sharing (concealment) when the firms choose accommodating strategies in the product market, the firm (consumers) may prefer information concealment (sharing) when it can exclude its competitor from the market. Hence, the rankings of expected profit and consumer surplus can be reversed if exit of the inefficient firm is possible. Although the efficient firm has stronger incentives to share information when it shares strategically, there remain cases in which the firm conceals information in equilibrium to induce exit.
    Keywords: cost asymmetry, Cournot duopoly, exit, information disclosure, precommitment
    JEL: D82 L13
    Date: 2009–10
  3. By: Alex Dickson (Department of Economics, University of Strathclyde); Roger Hartley (Department of Economics, University of Manchester)
    Abstract: Bilateral oligopoly is a strategic market game with two commodities, allowing strategic behavior on both sides of the market. When the number of buyers is large, such a game approximates a game of quantity competition played by sellers. We present examples which show that this is not typically a Cournot game. Rather, we introduce an alternative game of quantity competition (the market share game) and, appealing to results in the literature on contests, show that this yields the same equilibria as the many-buyer limit of bilateral oligopoly, under standard assumptions on costs and preferences. We also show that the market share and Cournot games have the same equilibria if and only if the price elasticity of the latter is one. These results lead to necessary and su¢ cient conditions for the Cournot game to be a good approximation to bilateral oligopoly with many buyers and to an ordering of total output when they are not satisfied.
    Keywords: Quantity competition, Cournot, strategic foundation, commitment
    JEL: C72 D21 D43
    Date: 2009–10
  4. By: Shi, Guanming (University of Wisconsin); Chavas, Jean-Paul (University of Wisconsin)
    Abstract: This paper investigates the pricing and vertical organization of differentiated products under imperfect competition. In a multiproduct context, a Cournot model is used to examine how substitution/complementarity relationships among products and vertical structures can affect the exercise of market power. This motivates a generalization of the Herfindahl-Hirschman index (termed VHHI) capturing how market concentration and vertical structures interact to influence prices of differentiated products. The analysis is applied to pricing of soybean seeds in the US over the period 2000-2007. We consider two vertical structures employed by biotech firms: vertical integration and licensing. The econometric analysis finds evidence that vertical organization has significant effects on seed prices. These effects are found to vary depending on the institutional setup and the bundling of genetic material. The empirical evidence shows that complementarity and economies of scope can reduce the effects of market concentration on prices.
    JEL: L13 L40 L65
    Date: 2009–04
  5. By: Lach, Saul (The Hebrew University); Moraga, Jose L. (University of Groningen)
    Abstract: This paper examines how the distribution of prices changes with the number of competitors in the market. Using gasoline price data from the Netherlands we find that as competition increases, the distribution of prices spreads out: the low prices go down while the high prices go up, on average. As a result, competition has an asymmetric effect on prices. These findings, which are consistent with a theoretical model where consumers differ in the information they have about prices, imply that consumers' gains from competition depend on their shopping behavior. In our data, all consumers, irrespective of the number of prices they observe, benefit from an increase in the number of gas stations. The magnitude of the welfare gain, however, is greater for those consumers that are aware of more prices. We conclude that an increase in the number of gas stations has a positive but unequal effect on the welfare of consumers in the Netherlands.
    Keywords: Asymmetric; Price; Effects; Competition;
    Date: 2009–06–15
  6. By: Gianpaolo Rossini (University of Bologna); Cecilia Vergari (University of Bologna)
    Abstract: In many industries it is quite common to observe firms delegating the production of essential inputs to independent ventures jointly established with competing rivals. The diffusion of this arrangement and the favourable stance of competition authorities call for the assessment of the social and private desirability of Input Production Joint Ventures (IPJV), which represent a form of input production cooperation, not investigated so far. IPJV can be seen as an intermediate organizational setting lying between the two extremes of vertical integration and vertical separation. Our investigation is based on an oligopoly model with horizontally differentiated goods. We characterize the conditions under which IPJV is privately optimal finding that firms’ incentives may be welfare detrimental. We also provide a rationale for the empirical relevance of IPJV both in terms of its ability to survive and in terms of disengagement incentives.
    Keywords: Input Production Joint Venture, Horizontal Differentiation, Oligopoly
    JEL: L24 L42
    Date: 2009–10
  7. By: Ciliberto, Federico; Panzar, John
    Abstract: We develop a partial equilibrium, perfectly competitive framework of a (potentially) vertically integrated industry. There are three types of firms: upstream firms that use primary factors to produce an intermediate; downstream firms that use primary factors and intermediates to produce a final good; and vertically integrated firms that do both. We establish conditions under which vertically integrated firms exist and outsource (part of) the production of the intermediate input. We study the changes in industry configurations resulting from changes in costs and demand.
    Keywords: Competitive Industry; Vertical Integration; Outsourcing.
    JEL: L11 L22
    Date: 2009–10–30
  8. By: Bardey, David (University of Rosario, Bogota); Cremer, Helmuth (TSE (GREMAQ-CNRS)); Lozachmeur, Jean-Marie (TSE (GREMAQ-CNRS))
    Date: 2009–10
  9. By: Casadesus-Masanell, Ramon (Harvard Business Scholl); Ruiz-Aliseda, Francisco (Universitat Pompeu Fabra)
    Abstract: Katz and Shapiro (1985) study systems compatibility in settings with one-sided platforms and direct network externalities. We consider systems compatibility in settings with two-sided platforms and indirect network externalities to develop an explanation why markets with two-sided platforms are often characterized by incompatibility with one dominant player who may subsidize access to one side of the market. We find that incompatibility gives rise to asymmetric equilibria with a dominant platform that earns more than under compatibility. We also find that incompatibility generates larger total welfare than compatibility when horizontal differences between platforms are small.
    Keywords: network; industries; platforms; markets;
    Date: 2009–06–17
  10. By: Lopez, Angel L. (IESE Business School); Rey, Patrick (Toulouse School of Economics)
    Abstract: This article analyzes competition between two asymmetric networks, an incumbent and a new entrant. Networks compete in non-linear tariffs and may charge different prices for on-net and off-net calls. Departing from cost-based access pricing allows the incumbent to foreclose the market in a profitable way. If the incumbent benefits from customer inertia, then it has an incentive to insist on the highest possible access markup even if access charges are reciprocal and even in the absence of actual switching costs. If instead the entrant benefits from customer activism, then foreclosure is profitable only when switching costs are large enough.
    Keywords: Networks; benefits; costs; customer;
    Date: 2009–07–09
  11. By: Domenico Colucci (Dipartimento di Matematica per le Decisioni, Universita' degli Studi di Firenze); Nicola Doni (Dipartimento di Scienze Economiche, Universita' degli Studi di Firenze); Vincenzo Valori (Dipartimento di Matematica per le Decisioni, Universita' degli Studi di Firenze)
    Abstract: We study a procurement auction recently analysed by Gal-Or et al. (2007). In this auction game the buyer ranks different bids on the basis of both the prices submitted and the quality of each bidder that is her private information. We emphasise the similarity between this model and existing models of competition in horizontally differentiated markets. Finally we illustrate conditions for the existence and the stability of such equilibrium. To this end we extend the model to a dynamic setting in which a sequence of independent auctions takes place. We assume bidders have bounded rationality in a twofold sense. On one hand, they use an underparametrized model of their competitors' behaviour, best responding to expectations on average bids rather than keeping track of the entire vector of competitors' bids. On the other they update expectations adaptively. In a general framework with more than two bidders the system may fail to converge to the steady state, i.e. to the symmetric Nash equilibrium of the original game.
    Keywords: Non-binding auctions, Product differentiation, Hotelling Duopoly, Expectations, Stability of steady states
    JEL: D43 D44 C62 D83
    Date: 2009–06
  12. By: Vroom, Govert (IESE Business School); Mccann, Brian T. (Krannet School of Management)
    Abstract: We question the broad applicability of the assumption of profit maximization as the goal of the firm and investigate how variance in objective functions across different ownership structures affects competitive behavior. While prior work in agency theory has argued that firms may fail to engage in profit maximizing behaviors due to misalignment between the goals of owners and managers, we contend that we are unlikely to observe pure profit maximizing behavior even in the case of the perfect alignment of goals that exists in owner-managed firms. We compare the competitive behaviors of owner-managed and professionally managed firms and find that, contrary to the expectations of agency theory, professionally managed firms are more likely to engage in behaviors consistent with profit-maximization goals. Consistent with the view that owner-managers are less concerned with maximizing profits, we observe that the entry, exit, and pricing decisions of owner-managed firms are all relatively less responsive to the underlying economic attractiveness of the markets in which they operate.
    Keywords: profit; behavior; goals; firms; market;
    Date: 2009–07–07
  13. By: Bargeron, Leonce L. (University of Pittsburgh); Schlingemann, Frederik P. (University of Pittsburgh); Stulz, Rene M. (Ohio State University); Zutter, Chad J. (University of Pittsburgh)
    Abstract: CEOs have a potential conflict of interest when their company is acquired: They can bargain to be retained by the acquirer and for private benefits rather than for a higher premium to be paid to the shareholders. We investigate the determinants of target CEO retention by the acquirer and whether target CEO retention affects the premium paid by the acquirer. The probability that a CEO is retained increases with a private bidder, the performance of the target, and with the fraction of target shares held by insiders. Regardless of the bidder type, we find no evidence that the premium paid is lower when the CEO is retained by the acquirer. Strikingly, the target stock price increases more at the announcement of an acquisition by a private firm when the CEO is retained than when she is not. This result holds whether the private acquirer is a private equity firm or an operating company and for management buyouts.
    JEL: G30 G34
    Date: 2009–09
  14. By: Ki H. Kang; Jina Kang (Technology Management, Economics and Policy Program(TEMEP), Seoul National University)
    Abstract: Recent research identify the type of partner as a critical factor determining the effect of R&D collaboration on innovation. Most firms tend to utilize various types of R&D collaboration partners simultaneously, and partnerships between different types of partners show different properties. Thus, the effect of R&D collaboration may vary depending on partner types. This study considers four partner types: competitors, customers, suppliers, and universities. It empirically examines the effect of R&D collaboration with each type of partner on product innovation,employing the Korea Innovation Survey data. Results show that R&D collaborations with customers and universities have a positive effect on product innovation, whereas R&D collaborations with suppliers and competitors have an inverted-U shape relationship with product innovation.
    Keywords: R&D collaboration, product innovation, competitors, customers, suppliers, universities
    Date: 2009–08
  15. By: Joanna Poyago-Theotoky (Rimini Centre for Economic Analysis (RCEA); University of Loughborough, Department of Economics); Khemarat Talerngsri Teerasuwannajak (Faculty of Economics, Chulalongkorn University)
    Abstract: We study fi…rms' preferences towards intellectual property rights (IPR) regimes in a North-South context, using a simple duopoly model where a 'North' and a 'South' firm compete in a third market. Unlike other contributions in this fi…eld, we explicitly introduce the South's capability to undertake cost-reducing R&D, but maintain the South's inferiority in utilizing and managing its R&D. In contrast to traditional results, we show that the North may encourage lax IPR protection provided that its South rival's R&D productivity is sufficiently high, while the South may fi…nd it in its best interest to strictly enforce IPR protection if its R&D productivity is low. In this sense, our results do not support the idea of universal or uniform IPR protection regime. In addition, we …find that if fi…rms are allowed to agree on any level of information exchange when IPR protection is strictly enforced, such an exchange can always be established as long as each fi…rm is ensured that what it gets to utilize in return is sufficiently more than what it gives to its rival.
    Keywords: intellectual property rights (IPR), cost-reducing R&D, R&D productivity, information exchange
    JEL: O34 F13 O32 O38 L13 D43
    Date: 2009–01
  16. By: Erel, Isil (Ohio State University); Liao, Rose C. (Ohio State University and Rutgers University); Weisbach, Michael S. (Ohio State University)
    Abstract: Despite the fact that one-third of worldwide mergers involve firms from different countries, the vast majority of the academic literature on mergers studies domestic mergers. What little has been written about cross-border mergers has focused on public firms, usually from the United States. Yet, the vast majority of cross-border mergers involve private firms that are not from the United States. We provide an analysis of a sample of 56,978 cross-border mergers occurring between 1990 and 2007. We first characterize the patterns of who buys whom: Geography matters, with firms being much more likely to purchase firms in nearby countries than in countries far away. Purchasers are usually but not always from developed countries and they tend to purchase firms in countries with lower investor protection and accounting standards. A significant factor in determining acquisition patterns is currency movements; firms tend to purchase firms from countries relative to which the acquirer's currency has appreciated. In addition economy-wide factors reflected in the country's stock market returns lead to acquisitions as well. Both the currency and stock market effect could reflect either misvaluation or wealth explanations. Our evidence is more consistent with the wealth explanation than the misvaluation explanation.
    Date: 2009–06
  17. By: Agyenim Boateng (Nottingham University Business School, University of Nottingham, Ningbo Campus, PR China); Ruthira Naraidoo (Department of Economics, University of Pretoria); Moshfique M. Uddin (Lecturer in Finance, School of Accounting & Financial Services, Leeds Metropolitan University, UK)
    Abstract: Most of the growth in international production over the past decade has been carried out via cross-border mergers and acquisitions. Yet previous empirical work relating to CBM&As has been confined to firm-specific factors. This is against the backdrop that researchers have not been able to develop a coherent theory explaining the increasing trends of CBM&As activity. Building on prior studies, this study attempts to extend the few existing studies by using a simple empirical nonlinear framework to analyse the number of cross-border mergers and acquisitions inflows between 1987 and 2008 into the UK from a macroeconomic perspective. The main findings are that the response of the inflow is asymmetric as there is more persistence during stock market booms versus recessions. There are asymmetries with respect to relative prices suggesting that an improvement in the terms of trade leads to higher inflows once the growth of stock prices is above a threshold level of 8%. Other factors which have significant bearing on CBM&As inflows are the rate of inflation and growth in real GDP.
    Keywords: Cross-border mergers & acquisitions, Macro-economic factors, UK, nonlinear LSTAR
    Date: 2009–11
  18. By: Hendrik Hakenes (Institute of Financial Economics, Leibniz University of Hannover); Isabel Schnabel (Department of Law and Economics, Johannes Gutenberg University Mainz)
    Abstract: We present a banking model with imperfect competition in which borrowers’ access to credit is improved when banks are able to transfer credit risks. However, the market for credit risk transfer (CRT) works smoothly only if the quality of loans is public information. If the quality of loans is private information, banks have an incentive to grant unprofitable loans in order to transfer them to other parties, leading to an increase in aggregate risk. Nevertheless, the introduction of CRT generally increases welfare in our setup. However, under private information, higher competition induces an expansion of loans to unprofitable firms, which in the limit offsets the welfare gains from CRT completely.
    Keywords: access to credit, bank competition, credit derivatives, Credit risk transfer, public and private information
    JEL: G13 G21 L11
    Date: 2009–10
  19. By: Helmut Dietl (Institute for Strategy and Business Economics, University of Zurich); Tobias Duschl (Institute for Strategy and Business Economics, University of Zurich); Egon Franck (Institute for Strategy and Business Economics, University of Zurich); Markus Lang (Institute for Strategy and Business Economics, University of Zurich)
    Abstract: This paper develops a model of a professional sports league with network externalities by integrating the theory of two-sided markets into a contest model. In professional team sports, leagues function as a platform that enables sponsors to interact with fans. In these league-mediated interactions, positive network effects operate from the fan market to the sponsor market, while negative network effects operate from the sponsor market to the fan market. Clubs react to these network effects by charging higher (lower) prices to sponsors (fans). Our analysis shows that the size of these network effects determines the level of competitive balance within the league. Traditional models, which do not take network externalities into account, under- or overestimate the actual level of competitive balance, which may lead to wrong policy decisions. Moreover, we show that clubs benefit from stronger combined network effects through higher profits. Finally, we derive policy recommendations for improving competitive balance by taking advantage of network externalities.
    Keywords: Competitive balance, contest, multisided market, network externalities, team sports league
    JEL: L11 L13 L83 M21
    Date: 2009–11
  20. By: Phillip Leslie; Alan Sorensen
    Abstract: We develop an equilibrium model of ticket resale in which buyers' decisions in the primary market, including costly efforts to "arrive early" to buy underpriced tickets, are based on rational expectations of resale market outcomes. We estimate the parameters of the model using a novel dataset that combines transaction data from both the primary and secondary markets for a sample of major rock concerts. Our estimates indicate that while resale improves allocative efficiency, half of the welfare gain from reallocation is offset by increases in costly effort in the arrival game and transaction costs in the resale market.
    JEL: D4 L0
    Date: 2009–11
  21. By: MATSUURA Toshiyuki; SUGANO Saki
    Abstract: In this paper, we quantified the effect of liberalization of entry restriction for large-scale retailers (LSR) on small and medium enterprises (SME) for the Japanese retailing sector in the late 1990s. We constructed a new regional database and compared SME performance at the regional level between regions with/without LSR entry. To tackle the endogeneity between LSR entry and SME performance, we used the propensity score matching method. Comparison with matched samples suggests that LSR entry does not have any negative effect on SME performance. On the contrary, we found a positive effect on SME sales and employment especially in suburban districts.
    Date: 2009–11
  22. By: Ole Boysen (Department of Economics, Trinity College Dublin); Carsten Schröder (Department of Economics, University of Kiel)
    Abstract: This paper analyzes the structural change of the German dairy sector using a sector-wide optimization model. We simulate cost-optimal sectoral structures under various scenarios for different time horizons and transport cost levels. The results demonstrate that the model is able to explain the current trend towards fewer but larger dairies as currently observed in reality and also indicate, ceteris paribus, a continuation of this trend. However, this trend might level off if the importance of transport costs increases relative to other costs in dairy production.
    Keywords: Capacitated facility location problem, structural change, transportation, simulation
    JEL: C15 C61 C63 L11 L91 Q12 R39
    Date: 2009–11
  23. By: Ramòn Jiménez-Toribio (MEMPES- AEA - university of Huelva - University of Huelva, Spain); Patrice Guillotreau (IRD - Institut de Recherche pour le Développement - Institut de Recherche pour le Développement et la société); Rémi Mongruel (UMR Amure - ifremer - IFREMER)
    Abstract: This paper evaluates the degree of integration between the world market and the major European marketplaces of frozen and canned tuna through both vertical and horizontal price relationships. Spatial linkages are investigated horizontally in order to estimate the connection between the European market and the world-wide market on the primary tage of the value chain. One of the key results is the high level of market integration at the exvessel stage, and the price leadership of yellowfin tuna over skipjack tuna. The same approach is applied at the ex-factory level. Basically, the European market for final goods appears to be segmented between the Northern countries consuming low-priced canned skipjack tuna imported from Asia (mainly Thailand) and the Southern countries (Italy, Spain) processing and importing yellowfin-based products sold at higher prices. France appears to be an intermediate market where both products are consumed. The former market is found to be well integrated to the world market and can be considered to be competitive, but there is a suspicion of market power being exercised on the latter. Price relationships are therefore tested vertically between the price of frozen tuna paid by the canneries and the price of canned fish in both Italy and France. The two species show an opposite pattern in prices transmission along the value chain: price changes along the chain are far better transmitted for the “global” skipjack tuna than for the more European” yellowfin tuna. The results are discussed, along with their implications for the fishing industry.
    Date: 2009
  24. By: Quan-Hoang Vuong (Centre Emile Bernheim, Solvay Brussels School of Economics and Management, Université Libre de Bruxelles, Brussels.); Tran Tri Dung (Dan Houtte, Vuong & Partners, Economic Research, Hanoi, Vietnam.); Thi Chau Ha NguyenN (Dan Houtte, Vuong & Partners, Economic Research, Hanoi, Vietnam.)
    Abstract: This paper is the first major and thorough study on the M&A activities in Vietnam’s emerging market economy, covering almost entirely the M&A history after the launch of Doi Moi. The surge in these activities since mid-2000s by no means incidentally coincides with the jump in FDI and FPI inflows into the nation. M&A industry in Vietnam has its socio-cultural traits that could help explain economic happenings, with anomalies and transitional characteristics, far better than even the most complete set of empirical data. Proceeds from sales of existing assets and firms have mainly flowed into the highly speculative industries of securities, banking, non-bank financials, portfolio investments and real estates. The impacts of M&A on Vietnam’s long-term prosperity are, thus, highly questionable. An observable high degree of volatility in the M&A processes would likely blow outthe high ex ante expectations by many speculators, when ex post realizations finally arrive. The effect of the past M&A evolution in Vietnam has been indecisively positive or negative, with significant presence of rent-seeking and likelihood of causing destructive entrepreneurship. From a socio-economic and cultural view, the degree of positive impacts it may result in for domestic entrepreneurship will perhaps be the single most important indicator.
    Keywords: Capital Market, Emerging Market, Entrepreneurship, Mergers and Acquisitions, Transition Economy, Vietnam.
    JEL: G34 G38 O16
    Date: 2009–11
  25. By: Chen, Fang (Chinese Academy of Sciences); Mohnen, Pierre (UNU-MERIT, Maastricht University, and CIRANO)
    Abstract: After joining the World Trade Organization (WTO), China witnessed a major inflow of Foreign Direct Investment (FDI). Many famous automobile firms of developed countries were attracted to invest in China to cooperate with domestic firms. This paper uses firm-level data of the Chinese automobile industry to analyze the determinants of, and the interrelationships between, innovation input and innovation output, and in particular whether FDI had any influence on these two aspects of innovation. A generalized tobit model will be estimated for both R&D and the share of innovative sales for 2002/2003 and 2005/2006. The findings show that FDI firms are less R&D intensive but, when they innovate in new products, they are more product innovative than domestic-funded firms.
    Keywords: FDI, China, R&D, innovation, automobile industry
    JEL: O14 L62 F21
    Date: 2009

This nep-com issue is ©2009 by Russell Pittman. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.