Dermot Leahy

Unionisation and Foreign Direct Investment: Challenging Conventional Wisdom?

This paper investigates the effects of different degrees of wage setting centralisation on the incentive of a MNE to locate in a host country, and on the host countrys welfare. Decentralised and centralised wage bargaining are considered. The nature of product market competition between the MNE and domestic firms proves crucial to results which cast doubt on some of the conventional wisdom on FDI. In particular, we show that: (i) it is not always welfare improving to attract inward FDI, and (ii) the MNE may prefer centralised to decentralised wage setting regimes.

Robust Rules for Industrial Policy in Open Economies

The theory of strategic trade policy yields ambiguous recommendations for assistance to exporting firms in oligopolistic industries. However, some writers have suggested that investment subsidies are a more robust recommendation than export subsidies. We show that, although ambiguous in principle, the case for investment subsidies is reasonably robust in practice. Except when functional forms exhibit arbitrary nonlinearities, it holds under both Cournot and Bertrand competition, with either costreducing or market-expanding investment, and with or without spillovers. Only if firms have strong asymmetries in their investment behaviour and engage in Bertrand competition is an investment tax clearly justified.

Learning by Doing, Precommitment and Infant-Industry Promotion

This paper examines the implications for strategic trade policy of different assumptions about precommitment. In a dynamic oligopoly game with learning by doing, the optimal first-period subsidy is lower if firms cannot precommit to future output than if they can; and is lower still if the government cannot precommit to future subsidies. In the linear case the optimal subsidy is increasing in the rate of learning with precommitment, but decreasing in it if the government cannot precommit. The infant-industry argument is thus reversed in the absence of precommitment, which has important implications for economic policy in dynamic environments.

Increased topoisomerase IIα expression in colorectal cancer is associated with advanced disease and chemotherapeutic resistance via inhibition of apoptosis

Topoisomerase IIalpha is a nuclear enzyme that regulates the tertiary structure of DNA. The influence of topoisomerase IIalpha gene (TOP2A) or protein alterations on disease progression and treatment response in colorectal cancer (CRC) is unknown. The study investigated the clinical relevance of topoisomerase IIalpha in CRC using in vivo and in vitro models. Differentially expressed genes in early and late-stage CRC were identified by array comparative genomic hybridization (CGH). Cellular location of gene amplifications was determined by fluorescence in situ hybridization (FISH). Topoisomerase IIalpha levels, proliferation index, and HER2 expression were examined in 228 colorectal tumors by immunohistochemistry. Overexpression of topoisomerase IIalpha in vitro was achieved by liposome-based transfection. Cell growth inhibition and apoptosis were quantified using the crystal violet assay and flow cytometry, respectively, in response to drug treatment. Amplification of TOP2A was identified in 3 (7.7%) tumors using array CGH and confirmed using FISH. At the protein level, topoisomerase IIalpha staining was observed in 157 (69%) tumors, and both staining and intensity levels were associated with an aggressive tumor phenotype (p values 0.04 and 0.005, respectively). Using logistic regression analysis, topoisomerase IIalpha remained significantly associated with advanced tumor stage when corrected for tumor proliferation (p=0.007) and differentiation (p=0.001). No association was identified between topoisomerase IIalpha and HER2. In vitro, overexpression of topoisomerase IIalpha was associated with resistance to irinotecan (p=0.001) and etoposide chemotherapy (p=0.03), an effect mediated by inhibition of apoptosis. Topoisomerase IIalpha overexpression is significantly associated with alterations in tumor behavior and response to drug treatment in CRC. Our results suggest that gene amplification may represent an important mechanism underlying these changes.

Follow-my-leader FDI and tacit collusion

Abstract This paper presents a simple model to illustrate the following idea: domestic rivals may be motivated to set up foreign production in the same country because the replication of each other’s foreign direct investment (FDI) facilitates collusive behaviour in the market in which they compete. This implies positive interdependence between firms’ FDI decisions, i.e. foreign investment by one firm brings increased incentive for others to follow suit.

Strategic Trade Policy with Heterogeneous Costs

The paper examines optimal strategic trade policy under a heterogeneous cost oligopoly. The first-best policy involves a structure of firm-specific export subsidies/taxes in which the government favours the most efficient firms only with a sufficiently low social cost of public funds. Copyright 2001 by Blackwell Publishing Ltd and the Board of Trustees of the Bulletin of Economic Research

Employment Protection and Globalisation in Dynamic Oligopoly

We construct a model in which oligopolistic firms decide where to locate. Firms choose to locate either in a country where employment protection implies costly output adjustments or in one without adjustment costs. Using a two-period three-stage game with uncertainty it is demonstrated that location is influenced by both flexibility and strategic concerns. We show that the strategic effects under Cournot work towards domestic anchorage in the country with adjustment costs while those under Bertrand do not. Strategic agglomeration can occur in the inflexible country under Cournot and even under Bertrand provided uncertainty and foreign direct investment costs are low.

Oligopoly and Trade

In this chapter we present a selective analytic survey of some of the main results of trade under oligopoly. We concentrate on three topics: oligopoly as an independent determinant of trade, as illustrated by the reciprocal-markets model of Brander (1981); oligopoly as an independent rationale for government intervention, as illustrated by strategic trade and industrial policy in the third-market model of Spencer and Brander (1983); and the challenges and potential of embedding trade under oligopoly in general equilibrium as illustrated by the GOLE model of Neary (2002).

Intellectual Property Rights and Entry into a Foreign Market: FDI vs. Joint Ventures

We study the effect of the intellectual property rights (IPR) regime of a host country (South) on a multinationals decision between serving a market via greenfield foreign direct investment to avoid the exposure of its technology or entering a joint venture (JV) with a local firm, which allows R&D spillovers under imperfect IPRs. JV is the equilibrium market structure when R&D intensity is moderate and IPRs strong. The South can gain from increased IPR protection by encouraging a JV, whereas policies to limit foreign ownership in a JV gain importance in technology intensive industries as complementary policies to strong IPRs.

'Make-or-Buy' in International Oligopoly And the Role of Competitive Pressure

We study how competitive pressure influences the make-or-buy decision that oligopolistic firms face between producing an intermediate component in-house or purchasing it from a domestic supplier. We model outsourcing as a bilateral relationship in which the supplier undertakes relationship specific investments. A home and foreign firm compete in the home market. Firms’ mode of operation decision depends on cost and strategic considerations. Competitive pressure increases firms’ incentive to outsource. Consumer gains from trade liberalisation are enhanced when it leads to less outsourcing.