Dual and common agency issues in international joint ventures: Evidence from China

Hein Roelfsema () and Y. Zhang

No 10-05, Working Papers from Utrecht School of Economics

Abstract: With the help of a theoretical model we analyze the relation between equity sharing in an international joint venture (EJV) and local public goods provision in a setting where the local government faces a commitment problem to provide public services ex post to the set-up of the firm. We show that to overcome such a dual agency problem, the multinational leaves more local rents to the local partner than in the first-best, so as to provide stronger incentives for the government to supply public goods. Applying dynamic panel data estimation, we test the trade-off between local public goods and ownership shares across 31 Chinese provinces to find support for our mechanism

Keywords: Equity sharing; foreign investment; local public goods; China (search for similar items in EconPapers)
Date: 2010
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Journal Article: DUAL AND COMMON AGENCY ISSUES IN INTERNATIONAL JOINT VENTURES: EVIDENCE FROM CHINA (2013)
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