Contracting Institutions and Ownership Structure in International Joint Ventures
AbstractThis 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 InfoPaper provided by CIRANO in its series CIRANO Working Papers with number 2013s-04.
Date of creation: 01 Feb 2013
Date of revision:
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More information through EDIRC
international joint venture; ownership structure; institutions; contract enforcement; judicial favoritism;
Find related papers by JEL classification:
- 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
- L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-03-02 (All new papers)
- NEP-BEC-2013-03-02 (Business Economics)
- NEP-CTA-2013-03-02 (Contract Theory & Applications)
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