Global Digital Platforms, Technology Transfer and FDI Policies in Two-Sided Markets

Title: Global Digital Platforms, Technology Transfer and FDI Policies in Two-Sided Markets
Format: Working Paper
Publication Date: 2021
Description:

This paper is motivated by the growing on-line trade and foreign direct investment (FDI) in e-commerce platforms such as Amazon, E-Bay, and Expedia. Using a two-sided markets model, we examine the preferences of a foreign firm and a host country government over two modes of FDI: de novo entry (through the establishment of a new platform) and acquisition of the domestic incumbent platform. Key elements in the model, are technology transfer, cross-side network externalities and platform service differentiation, which determine the ranking of the host country welfare gains and the entrant’s profits under the two entry modes. In the case where the foreign entrant and the host government disagree over the entry modes ranking, asymmetric foreign equity restrictions can induce the welfare-optimal choice of the entry mode by the foreign firm.

Ivan Allen College Contributors:
Categories:
  • Digitization, InfoTechs, and Social Networks
  • Economics of Telecommunications Networks
  • Firm Strategy
  • International Economics
  • International Trade Policy
  • International Trade Theory
Related Departments:
  • School of Economics