Ownership structure and technological upgrading in international joint ventures
Document Type
Journal article
Source Publication
Review of Development Economics
Publication Date
5-1-2004
Volume
8
Issue
2
First Page
279
Last Page
294
Abstract
In a model of a joint venture between a local and a foreign firm who provide complementary inputs, this paper derives optimal ownership structures under different sharing rules. The local firm's profits may be maximized by assigning a majority share to the foreign firm. Efficiency (i.e., the minimization of double moral hazard) requires that the firm with the more productive input should get majority ownership. When only the foreign firm can upgrade its input, it should receive a larger share than what it receives in the absence of upgrading. The analysis implies that a blanket policy of prohibiting majority foreign ownership is theoretically unfounded.
DOI
10.1111/j.1467-9361.2004.00233.x
Print ISSN
13636669
E-ISSN
14679361
Publisher Statement
Copyright © Blackwell Publishing Ltd 2004
Access to external full text or publisher's version may require subscription.
Full-text Version
Publisher’s Version
Language
English
Recommended Citation
Lin, P., & Saggi, K. (2004). Ownership structure and technological upgrading in international joint ventures. Review of Development Economics, 8(2), 279-294. doi: 10.1111/j.1467-9361.2004.00233.x