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Monitoring costs and the mode of international investment

Author

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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.

Suggested Citation

  • Chu-Chia S. Lin & Ivan Png, 2003. "Monitoring costs and the mode of international investment," Journal of Economic Geography, Oxford University Press, vol. 3(3), pages 261-274, July.
    • Handle: RePEc:oup:jecgeo:v:3:y:2003:i:3:p:261-274
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    Cited by:

    1. repec:bla:stratm:v:37:y:2016:i:12:p:2481-2502 is not listed on IDEAS
    2. Christian Dreger & Reinhold Kosfeld & Yanqun Zhang, 2016. "Determining minimum wages in China: Do economic factors dominate?," ERSA conference papers ersa16p101, European Regional Science Association.
    3. Mugele, Christian & Schnitzer, Monika, 2008. "Organization of multinational activities and ownership structure," International Journal of Industrial Organization, Elsevier, vol. 26(6), pages 1274-1289, November.
    4. Grossman, Gene M. & Helpman, Elhanan, 2004. "Managerial incentives and the international organization of production," Journal of International Economics, Elsevier, vol. 63(2), pages 237-262, July.
    5. Noriyuki Yanagawa, 2008. "Financial Imperfection and Outsourcing Decision," CARF F-Series CARF-F-134, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    6. 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, Oxford University Press, vol. 120(2), pages 729-761.
    7. 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.
    8. Noriyuki Yanagawa, 2008. "Financial Imperfection and Outsourcing Decision," CIRJE F-Series CIRJE-F-586, CIRJE, Faculty of Economics, University of Tokyo.
    9. 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.
    10. Chen, George Shih-Ku, 2009. "Agglomeration economies and the location of Taiwanese investment in China," MPRA Paper 13896, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • K0 - Law and Economics - - General

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