International Joint Venture under Asymmetric Information: Technology vis-a-vis Information Advantage
36 Pages Posted: 14 Sep 2007
Date Written: January 20, 2007
We study the relationship between a multinational corporation (MNC) and a domestic firm under demand uncertainty. The MNC possesses a superior production technology, but the domestic firm is better at predicting market demand. We examine how the MNC's preference for, and the ownership structure of, a joint venture depend on the credit market, demand uncertainty, the domestic firm's ability to gather demand information, the MNC's technology advantage, and the efficiency of technology transfer. We also consider a dynamic setting with technology spillover and show that whether technology spillover hinders or facilitates joint venture depends on the nature of the credit market.
Keywords: International joint venture, MNC, demand uncertainty, technology spillover, credit market, principal-agent.
JEL Classification: F23, L24, D86
Suggested Citation: Suggested Citation