Contracting Institutions and Ownership Structure in International Joint Ventures

31 Pages Posted: 13 Feb 2013

See all articles by Ari Van Assche

Ari Van Assche

HEC Montreal; Center for Interuniversity Research and Analysis on Organization (CIRANO)

Galina A. Schwartz

University of California, Berkeley

Date Written: February 13, 2013

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

JEL Classification: F23, L14, L24

Suggested Citation

Van Assche, Ari and Schwartz, Galina A., Contracting Institutions and Ownership Structure in International Joint Ventures (February 13, 2013). CIRANO - Scientific Publications 2013s-04, Available at SSRN: https://ssrn.com/abstract=2216920 or http://dx.doi.org/10.2139/ssrn.2216920

Ari Van Assche (Contact Author)

HEC Montreal ( email )

3000, Chemin de la Côte-Sainte-Catherine
Montreal, Quebec H2X 2L3
Canada

Center for Interuniversity Research and Analysis on Organization (CIRANO) ( email )

2020 rue University, 25th floor
Montreal H3C 3J7, Quebec
Canada

Galina A. Schwartz

University of California, Berkeley ( email )

310 Barrows Hall
Berkeley, CA 94720
United States

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