Contracting Institutions and Ownership Structure in International Joint Ventures

Ari Van Assche and Galina A. Schwartz

CIRANO Working Papers from CIRANO

Abstract: This paper examines the role of contracting institutions on a multinational firm's optimal ownership strategy. We develop a model in which both a multinational firm and its local joint venture partner can ex post engage in costly rent-seeking actions to increase their ex ante agreed upon revenue share. We show that the host country's level of contract enforcement and level of judicial favoritism affect the parties' incentives to contribute to the international joint venture. The model allows us to identify testable hypotheses relating these institutional features with the performance and optimal ownership structure of international joint ventures.

Keywords: international joint venture; ownership structure; institutions; contract enforcement; judicial favoritism (search for similar items in EconPapers)
JEL-codes: F23 L14 L24 (search for similar items in EconPapers)
Date: 2013-02-01
New Economics Papers: this item is included in nep-bec and nep-cta
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:cir:cirwor:2013s-04

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