Internalization choices under competition: A game theoretic approach
用博弈论模型分析竞争如何影响跨国公司的内部化决策，发现即使知识转移成本很低，竞争也常导致垄断，而垄断企业会外包生产并加强研发与营销内部化。
Research Summary A long‐standing void in international business literature is understanding whether and how the internalization choices of competing multinational enterprises (MNEs) affect each other. This paper presents a game‐theoretic, location‐allocation mathematical model that predicts the organizational boundaries of competing MNEs. Given multiple players in the market, the game analyzes the competition between MNEs with respect to market share, yielding Nash equilibria that determine how many MNEs will be left in the market, and whether their production and marketing sites are internalized or outsourced. Results of computational experiments suggest that the internalization choices of profit maximizing MNEs that compete with each other, sharply deviate from the internalization choices ignoring such competition. Managerial Summary We present a game theory model of the effect of competition between multinational enterprises (MNEs) on their decisions whether to outsource or internalize production and marketing activities. Our model predicts that, at the presence of even modest knowledge transfer costs, such competition likely results in a monopoly outcome. The monopolistic MNE outsources production and builds on the resources that are freed due to this outsourcing to establish more research and development units and internalize marketing units. In addition, our model shows that when knowledge transfer costs are negligible, entry barrier reduce and more competitors arises. These competing MNEs will split markets between them in order to avoid direct competition, will have a greater propensity to outsource their marketing sites, and will need fewer marketing sites to control worldwide sales.