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Monitoring Costs and the Mode of International Investment

  • Chu-Chia S. Lin

    (National Cheng-Chi University)

  • Ivan Png

    (National University of Singapore)

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.

(This abstract was borrowed from another version of this item.)

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File URL: http://econwpa.repec.org/eps/it/papers/0210/0210004.pdf
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Paper provided by EconWPA in its series International Trade with number 0210004.

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Length: 26 pages
Date of creation: 08 Oct 2002
Date of revision:
Handle: RePEc:wpa:wuwpit:0210004
Note: Type of Document - pdf; prepared on Windows-PC; to print on HP; pages: 26
Contact details of provider: Web page: http://econwpa.repec.org

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  1. Elizabeth S. Laderman & Ronald H. Schmidt & Gary C. Zimmerman, 1991. "Location, branching, and bank portfolio diversification: the case of agricultural lending," Economic Review, Federal Reserve Bank of San Francisco, issue Win, pages 24-38.
  2. Lafontaine, Francine & Slade, Margaret E., 1996. "Retail contracting and costly monitoring: Theory and evidence," European Economic Review, Elsevier, vol. 40(3-5), pages 923-932, April.
  3. Litwack, John M. & Qian, Yingyi, 1998. "Balanced or Unbalanced Development: Special Economic Zones as Catalysts for Transition," Journal of Comparative Economics, Elsevier, vol. 26(1), pages 117-141, March.
  4. Ji Li & Kevin Lam & Gongming Qian, 2001. "Does Culture Affect Behavior and Performance of Firms? The Case of Joint Ventures in China," Journal of International Business Studies, Palgrave Macmillan, vol. 32(1), pages 115-131, March.
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  6. Grossman, Sanford J. & Hart, Oliver D., 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Scholarly Articles 3450060, Harvard University Department of Economics.
  7. Thomas N. Hubbard, 2000. "The Demand For Monitoring Technologies: The Case Of Trucking," The Quarterly Journal of Economics, MIT Press, vol. 115(2), pages 533-560, May.
  8. Gomes-Casseres, Benjamin, 1989. "Ownership structures of foreign subsidiaries : Theory and evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 11(1), pages 1-25, January.
  9. Jiahua Che & Yingyi Qian, . "Insecure Property Rights and Government Ownership of Firms," Working Papers 97050, Stanford University, Department of Economics.
  10. Karin Fladmoe-Lindquist & Laurent L. Jacque, 1995. "Control Modes in International Service Operations: The Propensity to Franchise," Management Science, INFORMS, vol. 41(7), pages 1238-1249, July.
  11. Bruce Kogut & Harbir Singh, 1988. "The Effect of National Culture on the Choice of Entry Mode," Journal of International Business Studies, Palgrave Macmillan, vol. 19(3), pages 411-432, September.
  12. Hart, Oliver & Moore, John, 1990. "Property Rights and the Nature of the Firm," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1119-58, December.
  13. Keith D Brouthers & Lance Eliot Brouthers, 2001. "Explaining the National Cultural Distance Paradox," Journal of International Business Studies, Palgrave Macmillan, vol. 32(1), pages 177-189, March.
  14. Brickley, James A. & Dark, Frederick H., 1987. "The choice of organizational form The case of franchising," Journal of Financial Economics, Elsevier, vol. 18(2), pages 401-420, June.
  15. Jean-Fran├žois Hennart, 1991. "The Transaction Costs Theory of Joint Ventures: An Empirical Study of Japanese Subsidiaries in the United States," Management Science, INFORMS, vol. 37(4), pages 483-497, April.
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