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Adoption of new technology and joint venture instability

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  • Kabiraj, Tarun
  • Roy Chowdhury, Prabal

Abstract

We consider a joint venture between a local firm from a less developed country, and a foreign multinational. In a dynamic two period model, we demonstrate that the availability of new technology can trigger a joint venture breakdown, a result that is consistent with the empirical evidence. We find that such breakdown is more likely if the MNC is relatively patient, or, in contrast to the existing literature, there is an increase in the level of demand. Moreover, our results are robust to alternative assumptions regarding bargaining power and control.

Suggested Citation

  • Kabiraj, Tarun & Roy Chowdhury, Prabal, 2008. "Adoption of new technology and joint venture instability," Research in International Business and Finance, Elsevier, vol. 22(2), pages 108-123, June.
  • Handle: RePEc:eee:riibaf:v:22:y:2008:i:2:p:108-123
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    References listed on IDEAS

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    1. Tarun Kabiraj & Ching Chyi Lee & Sugata Marjit, 2005. "Cultural Compatibility and Joint Venture Instability: A Theoretical Analysis," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 40(2), pages 209-220, December.
    2. Sinha, Uday Bhanu, 2001. "Imitative innovation and international joint ventures: a dynamic analysis," International Journal of Industrial Organization, Elsevier, vol. 19(10), pages 1527-1562, December.
    3. Kippenberg, Eva, 2005. "Sectoral linkages of foreign direct investment firms to the Czech economy," Research in International Business and Finance, Elsevier, vol. 19(2), pages 251-265, June.
    4. Aimin Yan & Ming Zeng, 1999. "International Joint Venture Instability: A Critique of Previous Research, A Reconceptualization, and Directions for Future Research," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 30(2), pages 397-414, June.
    5. Costa Vieira, Pedro Cosme, 2004. "Is globalization a road to duopoly?," Research in International Business and Finance, Elsevier, vol. 18(2), pages 199-204, June.
    6. Kogut, Bruce, 1989. "The Stability of Joint Ventures: Reciprocity and Competitive Rivalry," Journal of Industrial Economics, Wiley Blackwell, vol. 38(2), pages 183-198, December.
    7. Marjit, Sugata & Chowdhury, Prabal Roy, 2004. "Asymmetric capacity costs and joint venture buy-outs," Journal of Economic Behavior & Organization, Elsevier, vol. 54(3), pages 425-438, July.
    8. Sinha, Uday Bhanu, 2001. "International joint venture, licensing and buy-out under asymmetric information," Journal of Development Economics, Elsevier, vol. 66(1), pages 127-151, October.
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    Cited by:

    1. 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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