Expropriation and control rights: A dynamic model of foreign direct investment
AbstractThis paper studies the strategic interaction between a foreign direct investor and a host country. We analyse how the investor can use his control rights to protect his investment, if he faces the risk of âcreeping expropriationâ once his investment is sunk. It is shown that this hold-up problem may cause underinvestment, if the outside option of the investor is too weak, and overinvestment if it is too strong. We also analyse the impact of spillover effects, give a rationale for âtax holidaysâ and examine how stochastic returns affect the strategic interaction of investor and host country.
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Bibliographic InfoArticle provided by Elsevier in its journal International Journal of Industrial Organization.
Volume (Year): 17 (1999)
Issue (Month): 8 (November)
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/505551
Other versions of this item:
- Schnitzer, Monika, 1998. "Expropriation and Control Rights: A Dynamic Model of Foreign Direct Investment," CEPR Discussion Papers 1891, C.E.P.R. Discussion Papers.
- Schnitzer, Monika, 1999. "Expropriation and control rights: A dynamic model of foreign direct investment," Munich Reprints in Economics 19890, University of Munich, Department of Economics.
- F2 - International Economics - - International Factor Movements and International Business
- F34 - International Economics - - International Finance - - - International Lending and Debt Problems
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
- O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
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- Grossman, Sanford J & Hart, Oliver, 1985. "The Cost and Benefits of Ownership: A Theory of Vertical and Lateral Integration," CEPR Discussion Papers 70, C.E.P.R. Discussion Papers.
- Bond, Eric W & Samuelson, Larry, 1986. "Tax Holidays as Signals," American Economic Review, American Economic Association, vol. 76(4), pages 820-26, September.
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