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International joint ventures and endogenous protection a political-economy approach

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  • Zhao, Laixun

Abstract

This paper constructs a model of international joint ventures (JVs) with political-economy considerations as the main motivation. A foreign firm decides whether to undertake full ownership foreign direct investment (FDI), or to form a JV with a home firm, while the home firm lobbies against foreign imports. It is shown that the formation of a JV is the equilibrium under certain conditions. If the foreign firm anticipates future protectionist threats and forms a JV with the home firm beforehand (quid pro quo JV), then the foreign firm's profit increases and the home firm's level of lobby decreases.

Suggested Citation

  • Zhao, Laixun, 1995. "International joint ventures and endogenous protection a political-economy approach," ビジネス創造センターディスカッション・ペーパー (Discussion papers of the Center for Business Creation) 10252/4192, Otaru University of Commerce.
  • Handle: RePEc:ota:busdis:10252/4192
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    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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