International joint venture: Buy-out and subsidiary

Uday Sinha

Journal of Economic Behavior & Organization, 2008, vol. 65, issue 3-4, 734-756

Abstract: This paper deals with the issue of instability of joint ventures in the context of international investment. In an adverse selection framework, we show (a) the partial share adjustment of a joint venture by a multinational corporation (MNC) and (b) the possibility of setting up a subsidiary by the MNC to compete with its existing joint venture counterpart. In our principal agent framework of buy-out, we find an interesting implication that under certain parameter configurations, the principal (MNC) prefers to offer a pooling contract as opposed to a separating contract, thereby deciding not to acquire the agent's true private information.

Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:65:y:2008:i:3-4:p:734-756

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