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Monitoring costs and the mode of international investment

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  • Chu-Chia S. Lin
  • Ivan Png

Abstract

Our central proposition is that monitoring costs increase with physical distance, and hence, direct investments located further from the foreign investor's home base should be more likely formed as joint ventures. Tests on a data set of Taiwanese direct investments in Mainland China provide robust support to the hypothesis. A project that was located 1000 kilometers further away was 13--17% more likely to be formed as a joint venture. Copyright 2003, Oxford University Press.

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Bibliographic Info

Article provided by Oxford University Press in its journal Journal of Economic Geography.

Volume (Year): 3 (2003)
Issue (Month): 3 (July)
Pages: 261-274

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Handle: RePEc:oup:jecgeo:v:3:y:2003:i:3:p:261-274

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  7. Lafontaine, Francine & Slade, Margaret E., 1996. "Retail contracting and costly monitoring: Theory and evidence," European Economic Review, Elsevier, vol. 40(3-5), pages 923-932, April.
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Cited by:
  1. Mugele, Christian & Schnitzer, Monika, 2006. "Organization of Multinational Activities and Ownership Structure," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5592, C.E.P.R. Discussion Papers.
  2. Grossman, Gene & Helpman, Elhanan, 2003. "Managerial Incentives and the International Organization of Production," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3737, C.E.P.R. Discussion Papers.
  3. Noriyuki Yanagawa, 2008. "Financial Imperfection and Outsourcing Decision," CIRJE F-Series, CIRJE, Faculty of Economics, University of Tokyo CIRJE-F-586, CIRJE, Faculty of Economics, University of Tokyo.
  4. Chong-En Bai & Zhigang Tao & Changqi Wu, 2004. "Revenue Sharing and Control Rights in Team Production: Theories and Evidence from Joint Ventures," RAND Journal of Economics, The RAND Corporation, vol. 35(2), pages 277-305, Summer.
  5. Robert C. Feenstra & Gordon H. Hanson, 2005. "Ownership and Control in Outsourcing to China: Estimating the Property-Rights Theory of the Firm," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 120(2), pages 729-761, May.
  6. Noriyuki Yanagawa, 2008. "Financial Imperfection and Outsourcing Decision," CARF F-Series, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo CARF-F-134, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
  7. Chen, George Shih-Ku, 2009. "Agglomeration economies and the location of Taiwanese investment in China," MPRA Paper 13896, University Library of Munich, Germany.
  8. Du, Julan & Lu, Yi & Tao, Zhigang, 2008. "Economic institutions and FDI location choice: Evidence from US multinationals in China," Journal of Comparative Economics, Elsevier, vol. 36(3), pages 412-429, September.

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