DUAL AND COMMON AGENCY ISSUES IN INTERNATIONAL JOINT VENTURES: EVIDENCE FROM CHINA

Yi Zhang () and Hein Roelfsema ()
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Yi Zhang: Jinhe Center for Economic Research, Xi'an Jiaotong University, No. 28 Xianning West Road, Xi'an, Shaanxi, 710049, China

The Singapore Economic Review (SER), 2013, vol. 58, issue 03, 1-25

Abstract: With the help of a theoretical model, we analyze the relation between rent sharing in an international equity joint venture (EJV) and local public goods provision. In our setting, the local government faces a commitment problem to provide public servicesex postto the set-up of the firm. We show that, to overcome such a dual agency problem, the multinational enterprise leaves more rents to the local partner than in the first-best to provide stronger incentives for local public investment. We test the trade-off between local public goods and ownership shares across Chinese provinces to find support for our mechanism.

Keywords: Rent sharing; local public goods; foreign investment; China; F21; F23; L14; L22; H41 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (1)

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Working Paper: Dual and common agency issues in international joint ventures: Evidence from China (2010)
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DOI: 10.1142/S0217590813500203

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