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Contracting institutions and ownership structure in international joint ventures

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  • Van Assche, Ari
  • Schwartz, Galina A.
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    Abstract

    This paper examines the role of contracting institutions on a multinational firm's optimal ownership strategy. We develop a model in which both a multinational firm and its local joint venture partner can ex post engage in costly rent-seeking actions to increase their ex ante agreed upon revenue share. We show that the host country's level of contract enforcement and level of judicial favoritism affect the parties' incentives to contribute to the international joint venture. The model allows us to identify testable hypotheses relating these institutional features with the performance and optimal ownership structure of international joint ventures.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Development Economics.

    Volume (Year): 103 (2013)
    Issue (Month): C ()
    Pages: 124-132

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    Handle: RePEc:eee:deveco:v:103:y:2013:i:c:p:124-132

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    Web page: http://www.elsevier.com/locate/devec

    Related research

    Keywords: International joint venture; Ownership structure; Institutions; Contract enforcement; Judicial favoritism;

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    16. Klaus E. Meyer & Saul Estrin & Sumon Kumar Bhaumik & Mike W. Peng, 2009. "Institutions, resources and entry strategies in emerging economies," LSE Research Online Documents on Economics 4217, London School of Economics and Political Science, LSE Library.
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    Cited by:
    1. Latzer, Hélène, 2013. "Bridging the technology gap with limited human capital resources," Economic Modelling, Elsevier, vol. 35(C), pages 175-184.

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