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International joint venture: Buy-out and subsidiary

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  • Sinha, Uday Bhanu

Abstract

This paper deals with the issue of instability of joint ventures in the context of international investment. In an adverse selection framework, we show (a) the partial share adjustment of a joint venture by a multinational corporation (MNC) and (b) the possibility of setting up a subsidiary by the MNC to compete with its existing joint venture counterpart. In our principal agent framework of buy-out, we find an interesting implication that under certain parameter configurations, the principal (MNC) prefers to offer a pooling contract as opposed to a separating contract, thereby deciding not to acquire the agent's true private information.

Suggested Citation

  • Sinha, Uday Bhanu, 2008. "International joint venture: Buy-out and subsidiary," Journal of Economic Behavior & Organization, Elsevier, vol. 65(3-4), pages 734-756, March.
  • Handle: RePEc:eee:jeborg:v:65:y:2008:i:3-4:p:734-756
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    References listed on IDEAS

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    Cited by:

    1. Rousselière, Samira & Rousselière, Damien & Ramani, Shyama, 2016. "Innovation Led Alliances: Theory and application to the GM Plant Industry," 149th Seminar, October 27-28, 2016, Rennes, France 244949, European Association of Agricultural Economists.
    2. Chia Sun, 2014. "A conceptual framework for R&D strategic alliance assessment for Taiwan’s biotechnology industry," Quality & Quantity: International Journal of Methodology, Springer, vol. 48(1), pages 259-279, January.
    3. Quan Dong & Juan Carlos Bárcena-Ruiz & María Begoña Garzón, 2015. "Restrictions on Foreign Investments and the Relocation of Firms," Australian Economic Papers, Wiley Blackwell, vol. 54(4), pages 250-265, December.
    4. repec:spr:manint:v:49:y:2009:i:3:d:10.1007_s11575-009-0144-y is not listed on IDEAS
    5. Bukhvalov, A. & Alekseeva, O., 2016. "International joint venture acquisition by a foreign or local partner," Working Papers 6439, Graduate School of Management, St. Petersburg State University.
    6. Banerjee, Shantanu & Mukherjee, Arijit, 2010. "Joint venture instability in developing countries under entry," International Review of Economics & Finance, Elsevier, vol. 19(4), pages 603-614, October.

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