Research Library

Premium Foreign Investment, Vertical Integration and Local Equity Requirements
Chakrabarti Avik,
Heywood John S.
Publication year2004
Publication title
Resource typeJournals
PublisherBlackwell Publishing
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.
Subject(s)business , computer network , computer science , economics , epistemology , equity (law) , equity capital markets , finance , foreign direct investment , industrial organization , international economics , intuition , law , macroeconomics , market economy , microeconomics , monetary economics , monopoly , philosophy , political science , private equity , upstream (networking) , vertical integration
SCImago Journal Rank1.532

Seeing content that should not be on Zendy? Contact us.

This content is not available in your region!

Continue researching here.

Having issues? You can contact us here