Title

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

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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