Advanced Search
MyIDEAS: Login to save this article or follow this journal

Whole vs. shared ownership of foreign affiliates

Contents:

Author Info

  • Raff, Horst
  • Ryan, Michael
  • Stähler, Frank

Abstract

This paper studies why multinational firms often share ownership of a foreign affiliate with a local partner even in the absence of government restrictions on ownership. We show that shared ownership may arise, if (i) the partner owns assets that are potentially important for the investment project, and (ii) the value of these assets is private information. In this context shared ownership acts as a screening device. Our model predicts that the multinational's ownership share is increasing in its productivity, with the most productive multinationals choosing not to rely on a foreign partner at all. This prediction is shown to be consistent with data on the ownership choices of Japanese multinationals.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/B6V8P-4VFC7RD-2/2/c04985b582cd2a90dd8deba2ce7ab6d0
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal International Journal of Industrial Organization.

Volume (Year): 27 (2009)
Issue (Month): 5 (September)
Pages: 572-581

as in new window
Handle: RePEc:eee:indorg:v:27:y:2009:i:5:p:572-581

Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/505551

Related research

Keywords: Foreign direct investment Multinational enterprise Joint venture Productivity;

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Hart, Oliver & Moore, John, 1990. "Property Rights and the Nature of the Firm," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1119-58, December.
  2. Michael W. Klein & Eric Rosengren & Joe Peek, 2000. "Troubled banks, impaired foreign direct investment: the role of relative access to credit," Working Papers 00-4, Federal Reserve Bank of Boston.
  3. Jean-François Hennart, 1991. "The Transaction Costs Theory of Joint Ventures: An Empirical Study of Japanese Subsidiaries in the United States," Management Science, INFORMS, vol. 37(4), pages 483-497, April.
  4. Müller, Thomas & Schnitzer, Monika, 2003. "Technology Transfer and Spillovers in International Joint Ventures," Discussion Papers in Economics 93, University of Munich, Department of Economics.
  5. Gordon, R.H. & Bovenberg, A.L., 1994. "Why is capital so immobile internationally?: Possible explanations and implications for capital income taxation," Discussion Paper 1994-63, Tilburg University, Center for Economic Research.
  6. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," Review of Economic Studies, Wiley Blackwell, vol. 70(2), pages 317-341, 04.
  7. Elhanan Helpman, 2006. "Trade, FDI, and the Organization of Firms," NBER Working Papers 12091, National Bureau of Economic Research, Inc.
  8. Elizabeth Asiedu & Hadi Salehi Esfahani, 2001. "Ownership Structure In Foreign Direct Investment Projects," The Review of Economics and Statistics, MIT Press, vol. 83(4), pages 647-662, November.
  9. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, December.
  10. J Peter Neary, 2004. "Cross-Border Mergers as Instruments of Comparative Advantage," Working Papers 200404, School Of Economics, University College Dublin.
  11. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
  12. Delgado, Miguel A. & Farinas, Jose C. & Ruano, Sonia, 2002. "Firm productivity and export markets: a non-parametric approach," Journal of International Economics, Elsevier, vol. 57(2), pages 397-422, August.
  13. Qiu, Larry D. & Zhou, Wen, 2006. "International mergers: Incentives and welfare," Journal of International Economics, Elsevier, vol. 68(1), pages 38-58, January.
  14. Head, Keith & Ries, John, 2003. "Heterogeneity and the FDI versus export decision of Japanese manufacturers," Journal of the Japanese and International Economies, Elsevier, vol. 17(4), pages 448-467, December.
  15. Grossman, Sanford J. & Hart, Oliver D., 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Scholarly Articles 3450060, Harvard University Department of Economics.
  16. Ryan, Michael & Raff, Horst, 2007. "Firm-Specific Characteristics and the Timing of Foreign Direct Investment Projects," Economics Working Papers 2007,22, Christian-Albrechts-University of Kiel, Department of Economics.
  17. Jullien, Bruno, 1997. "Participation Constraints in Adverse Selection Models," IDEI Working Papers 67, Institut d'Économie Industrielle (IDEI), Toulouse.
  18. G. Steven Olley & Ariel Pakes, 1992. "The Dynamics of Productivity in the Telecommunications Equipment Industry," NBER Working Papers 3977, National Bureau of Economic Research, Inc.
  19. Reuer, Jeffrey J. & Ragozzino, Roberto, 2008. "Adverse selection and M&A design: The roles of alliances and IPOs," Journal of Economic Behavior & Organization, Elsevier, vol. 66(2), pages 195-212, May.
  20. Raff, Horst & Ryan, Michael & Stähler, Frank, 2008. "Firm Productivity and the Foreign-Market Entry Decision," Economics Working Papers 2008,02, Christian-Albrechts-University of Kiel, Department of Economics.
  21. Nakamura, M. & Xie, J., 1998. "Nonverifiability, noncontractibility and ownership determination models in foreign direct investment, with an application to foreign operations in Japan," International Journal of Industrial Organization, Elsevier, vol. 16(5), pages 571-599, September.
  22. Bergstrom, Theodore C & Varian, Hal R, 1985. "When Are Nash Equilibria Independent of the Distribution of Agents' Characteristics?," Review of Economic Studies, Wiley Blackwell, vol. 52(4), pages 715-18, October.
  23. Datar, Srikant & Frankel, Richard & Wolfson, Mark, 2001. "Earnouts: The Effects of Adverse Selection and Agency Costs on Acquisition Techniques," Journal of Law, Economics and Organization, Oxford University Press, vol. 17(1), pages 201-38, April.
  24. Jeffrey J Reuer & Oded Shenkar & Roberto Ragozzino, 2004. "Mitigating risk in international mergers and acquisitions: the role of contingent payouts," Journal of International Business Studies, Palgrave Macmillan, vol. 35(1), pages 19-32, January.
  25. Sourafel Girma & Richard Kneller & Mauro Pisu, 2005. "Exports versus FDI: An Empirical Test," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 141(2), pages 193-218, July.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Raff, Horst & Wagner, Joachim, 2013. "Foreign Ownership and the Extensive Margins of Exports: Evidence for Manufacturing Enterprises in Germany," Working Paper Series in Economics and Institutions of Innovation 317, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
  2. Peter Nunnenkamp & Maximiliano Sosa Andrés, 2013. "Ownership Choices of Indian Direct Investors: Do FDI Determinants Differ between Joint Ventures and Wholly-owned Subsidiaries?," Kiel Working Papers 1841, Kiel Institute for the World Economy.
  3. Gattai, Valeria & Natale, Piergiovanna, 2013. "What makes a joint venture: Micro-evidence from Sino-Italian contracts," Review of Financial Economics, Elsevier, vol. 22(4), pages 194-205.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:indorg:v:27:y:2009:i:5:p:572-581. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.