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On the choice of international joint venture: the role of policy moral hazard

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  • Satya P. Das

Abstract

This paper examines the choice problem facing a multinational firm, whether to establish a wholly owned subsidiary or form a joint venture with a firm from the host country, as the mode of direct foreign investment. It is shown that, all other considerations aside, the prospect of policy variation toward the venture (restrictive or conducive), which is called policy moral hazard facing the host government, is a factor for joint venture to emerge as the preferred option.

Suggested Citation

  • Satya P. Das, 1998. "On the choice of international joint venture: the role of policy moral hazard," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 2(2), pages 135-150.
    • Handle: RePEc:taf:jpolrf:v:2:y:1998:i:2:p:135-150
    DOI: 10.1080/13841289808523378
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    Cited by:

    1. Satya P. Das & Sarbajit Sengupta, 2001. "Asymmetric Information, Bargaining, and International Mergers," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 10(4), pages 565-590, December.
    2. Prabal Roy Chowdhury, 2003. "Joint venture instability and monitoring," Discussion Papers 04-09, Indian Statistical Institute, Delhi.
    3. Marjit, Sugata & Mukherjee, Arijit & Kabiraj, Tarun, 2004. "Future technology, incomplete information and international joint venture," Research in Economics, Elsevier, vol. 58(3), pages 219-234, September.
    4. Roy Chowdhury, Prabal & Roy Chowdhury, Indrani, 2001. "Joint venture instability: a life cycle approach," MPRA Paper 1556, University Library of Munich, Germany, revised Jan 2007.
    5. 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.
    6. Indrani Roy Chowdhury & Prabla Chowdhury, 2002. "International Joint Ventures: A Welfare Analysis," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 5(1), pages 51-60.
    7. 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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