AbstractThis paper analyses how a firm chooses between direct ownership and licensing or franchising contracts in supplying distant markets. When contracts are incomplete we show that this choice must balance the moral hazard associated with appointing external agents against that associated with employing internal managers. We show that licensing contracts are preferred when the outside agent has limited opportunities for changing product technology or if there are few spillover effects from the licensee's market to the licensor's home market. Internalization is preferred when the advantages of the 357254201rm are knowledge-based and when reputational effects are strong.
Download InfoIf 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.
Bibliographic InfoArticle provided by Mohr Siebeck, Tübingen in its journal Journal of Institutional and Theoretical Economics.
Volume (Year): 165 (2009)
Issue (Month): 1 (March)
Contact details of provider:
Web page: http://www.mohr.de/jite
Postal: Mohr Siebeck GmbH & Co. KG, P.O.Box 2040, 72010 Tübingen, Germany
Other versions of this item:
- George Norman, 2000. "Internalization Revisited," Discussion Papers Series, Department of Economics, Tufts University 0013, Department of Economics, Tufts University.
- D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
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.:
- Oliver Hart & John Moore, 1988.
"Property Rights and the Nature of the Firm,"
495, Massachusetts Institute of Technology (MIT), Department of Economics.
- Motta, Massimo & Norman, George, 1996.
"Does Economic Integration Cause Foreign Direct Investment?,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(4), pages 757-83, November.
- Massimo Motta & George Norman, 1993. "Does economic integration cause foreign direct investment?," Economics Working Papers 28, Department of Economics and Business, Universitat Pompeu Fabra.
- Ignatius J. Horstmann & James R. Markusen, 1990. "Endogenous Market Structures in International Trade," NBER Working Papers 3283, National Bureau of Economic Research, Inc.
- George Norman & John Dunning, 1984. "Intra-industry foreign direct investment: Its rationale and trade effects," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 120(3), pages 522-540, September.
- repec:fth:michin:282 is not listed on IDEAS
- George A. Akerlof, 1997. "Social Distance and Social Decisions," Econometrica, Econometric Society, vol. 65(5), pages 1005-1028, September.
- Morck, Randall & Yeung, Bernard, 1991.
"Why Investors Value Multinationality,"
The Journal of Business,
University of Chicago Press, vol. 64(2), pages 165-87, April.
- Rugman, Alan M, 1986. "New Theories of the Multinational Enterprise: An Assessment of Internalization Theory," Bulletin of Economic Research, Wiley Blackwell, vol. 38(2), pages 101-18, May.
- James R. Markusen, 1995. "The Boundaries of Multinational Enterprises and the Theory of International Trade," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 169-189, Spring.
- Barrell, Ray & Pain, Nigel, 1997. "Foreign Direct Investment, Technological Change, and Economic Growth within Europe," Economic Journal, Royal Economic Society, vol. 107(445), pages 1770-86, November.
- Motta, Massimo, 1992. "Multinational firms and the tariff-jumping argument : A game theoretic analysis with some unconventional conclusions," European Economic Review, Elsevier, vol. 36(8), pages 1557-1571, December.
- John H Dunning, 1995. "Reappraising the Eclectic Paradigm in an Age of Alliance Capitalism," Journal of International Business Studies, Palgrave Macmillan, vol. 26(3), pages 461-491, September.
- Thandar Khine, 2008. "Foreign Direct Investment Relations between Myanmar and ASEAN," IDE Discussion Papers 149, Institute of Developing Economies, Japan External Trade Organization(JETRO).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Wolpert).
If references are entirely missing, you can add them using this form.