Institutions and Multinational Ownership Strategy

Ari Van Assche and Galina A. Schwartz

CIRANO Working Papers from CIRANO

Abstract: This paper examines the impact of institutions on a multinational firm's ownership strategy. We develop an international joint venture (IJV) model in which a multinational firm and its local partner both can undertake costly ex post actions to increase their revenue share specified by the ex ante IJV contract. The model captures the effects of two institutional features on the optimal IJV ownership structure: contract enforceability and cronyism. We introduce the IJV model into an industry equilibrium framework to analyze the impact of institutions on a multinational firm's choice between forming an IJV or setting up a wholly-owned subsidiary. Ce papier examine l'impact des institutions sur la stratégie de propriété d'une entreprise multinationale. Nous développons un modèle de coentreprise internationale dans lequel une entreprise étrangère et son partenaire local peuvent ex post entreprendre des actions coûteuses pour augmenter leur part de revenus indiquée dans le contrat de coentreprise. Le modèle analyse les impacts de deux caractéristiques institutionnelles sur la structure de propriété optimale : le renforcement du contrat et le copinage. Nous introduisons le modèle de coentreprise dans un modèle d'équilibre général pour analyser l'impact des institutions sur le mode d'entrée des entreprises multinationales.

Keywords: liability of foreignness; international joint venture; contract enforceability; cronyism; coentreprise internationale; renforcement du contrat; copinage (search for similar items in EconPapers)
JEL-codes: F12 F23 (search for similar items in EconPapers)
Date: 2008-03-01
New Economics Papers: this item is included in nep-cse
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Persistent link: https://EconPapers.repec.org/RePEc:cir:cirwor:2008s-07

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