International joint ventures and tax competition in an integrated market

Litao Zhong and Sajal Lahiri

International Review of Economics & Finance, 2009, vol. 18, issue 1, 38-44

Abstract: The purpose of this paper is two-fold. First, it develops a theoretical model of international joint ventures to suggest a new approach to the determination of profit allocation between the partners in the joint venture. Second, we examine the issue of tax competition between two countries for an international joint venture. We find that even in the absence of any bargaining power for the domestic firms, the foreign firm would like to give up more than half of profits to its partner. Furthermore, the foreign firm would like to locate in a country in which the partner firm is more efficient. We also find, with numerical simulations, that the domestic firm will accept the joint venture if the foreign firm's technology is significantly more superior than its own.

Keywords: Joint; ventures; Profit; sharing; Tax; competition; Oligopoly (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:18:y:2009:i:1:p:38-44

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