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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. --

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File URL: http://econstor.eu/bitstream/10419/22034/1/EWP-2007-18.pdf
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Bibliographic Info

Paper provided by Christian-Albrechts-University of Kiel, Department of Economics in its series Economics Working Papers with number 2007,18.

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Date of creation: 2007
Date of revision:
Handle: RePEc:zbw:cauewp:5684

Contact details of provider:
Postal: D-24098 Kiel,Wilhelm-Seelig-Platz 1
Phone: 0431-880 3282
Fax: 0431-880 3150
Web page: http://www.wiso.uni-kiel.de/econ/
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Related research

Keywords: Foreign direct investment; ownership; joint venture; productivity;

Other versions of this item:

Find related papers by JEL classification:

• L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
• F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

This paper has been announced in the following NEP Reports:

• NEP-ALL-2007-07-27 (All new papers)
• NEP-PPM-2007-07-27 (Project, Program & Portfolio Management)

References

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Citations

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Cited by:

1. Görg, Holger & Mühlen, Henning & Nunnenkamp, Peter, 2010. "FDI liberalization, firm heterogeneity and foreign ownership: German firm decisions in reforming India," Proceedings of the German Development Economics Conference, Hannover 2010 35, Verein für Socialpolitik, Research Committee Development Economics.
   
   • Holger Gorg & Henning Muhlen & Peter Nunnenkamp, 2010. "FDI Liberalisation, Firm Heterogeneity and Foreign Ownership: German Firm Decisions in Reforming India," The Journal of Development Studies, Taylor and Francis Journals, vol. 46(8), pages 1367-1384.
2. Cieslik, Andrzej & Ryan, Michael, 2009. "Firm heterogeneity, foreign market entry mode and ownership choice," Japan and the World Economy, Elsevier, vol. 21(3), pages 213-218, August.

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