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Firm heterogeneity and the integration trilemma: The utility of Joint ventures in integration versus outsourcing models

Author

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  • Charlie Joyez

    (Université Paris-Dauphine, PSL Research University,IRD, LEDa, DIAL)

Abstract

The traditional Grossman-Hart-Moore (GHM) property right theory of the ?rm does not consider shared ownership as an optimal solution because of the incentive loss it would be responsible for. This paper examines the rationale for speci?c cases of shared ownership: International Joint Ventures (JVs), with heterogeneous ?rms in various host-countries. Speci?cally, we built a theoretical model that extends the Antr`as & Helpman (2008) integration dilemma under partially incomplete contracts to international joint-ventures. These turn to be the optimal ownership structure in two different cases. Speci?cally, for medium-productive ?rms when the most productive would opt for full integration. More interestingly JVs turns to be the optimal ownership choice, even for most productive ?rms in countries with lower quality of contractual institutions. The model insists then on the interaction between ?rm-level and country-level parameters, with higher productivity giving increasing access to higher ownership share in countries with stronger contractual enforceability.

Suggested Citation

  • Charlie Joyez, 2017. "Firm heterogeneity and the integration trilemma: The utility of Joint ventures in integration versus outsourcing models," Working Papers DT/2017/09, DIAL (Développement, Institutions et Mondialisation).
  • Handle: RePEc:dia:wpaper:dt201709
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    References listed on IDEAS

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    Cited by:

    1. Charlie Joyez, 2018. "Interaction between firm-level and host-country characteristics and multinationals' integration choices," Working Papers DT/2018/03, DIAL (Développement, Institutions et Mondialisation).

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    More about this item

    Keywords

    Property Right Theory; Asset Ownership; Shared Ownership; International Joint Ventures.;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures

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