Les Cahiers de Recherche - HEC Paris
Santiago Urbiztondo, Jean-Philippe Bonardi
International Expansion, Diversification and Regulated Firm Nonmarket Strategy
() and Bertrand V. Quelin
Abstract: Previous studies have shown that regulated firms diversify
for reasons that are different than for unregulated firms. We explore some
of these differences by providing a theoretical model that starts by
considering the firm-regulator relationship as an incomplete information
issue, in which a regulated incumbent has knowledge that the regulator does
not have, but the firm cannot convey hard information about this knowledge.
The incumbent faces both market and nonmarket competition from a new
entrant. In that context, we show that when the firm faces tough nonmarket
competition domestically, going abroad can create a mechanism that makes
information transmission to the regulator more credible. International
expansion can thus be a way to solve domestic nonmarket issues in addition
to being a catalyst for growth.
Keywords: Regulation; nonmarket strategy; international investments; diversification; (follow links to similar papers)
JEL-Codes: G00; (follow links to similar papers)
41 pages, December 21, 2012
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