TY - JOUR
T1 - Determinants of the foreign equity share of international joint ventures
AU - Lee, Tan
PY - 2004/10
Y1 - 2004/10
N2 - Due to host government restrictions, a multinational corporation is required to form a joint venture with a local partner rather than set up a wholly owned subsidiary. Both parties to the joint venture simultaneously decide their respective equity shares and the time to exercise an irreversible investment project via Nash-bargaining. Since the multinational corporation has a cost advantage over its local partner, it will therefore hold a share larger than its relative bargaining power. However, if its cost advantage is less significant, uncertainty is greater, or the cost of exercising the investment option is increasing over time at a lower rate, the multinational firm will hold a smaller share and will also be more hesitant as regards exercising the investment option.
AB - Due to host government restrictions, a multinational corporation is required to form a joint venture with a local partner rather than set up a wholly owned subsidiary. Both parties to the joint venture simultaneously decide their respective equity shares and the time to exercise an irreversible investment project via Nash-bargaining. Since the multinational corporation has a cost advantage over its local partner, it will therefore hold a share larger than its relative bargaining power. However, if its cost advantage is less significant, uncertainty is greater, or the cost of exercising the investment option is increasing over time at a lower rate, the multinational firm will hold a smaller share and will also be more hesitant as regards exercising the investment option.
KW - Foreign equity share
KW - Joint ventures
KW - Nash-bargaining
KW - Real options
UR - http://www.scopus.com/inward/record.url?scp=4043130464&partnerID=8YFLogxK
U2 - 10.1016/j.jedc.2003.10.004
DO - 10.1016/j.jedc.2003.10.004
M3 - 期刊論文
AN - SCOPUS:4043130464
SN - 0165-1889
VL - 28
SP - 2261
EP - 2275
JO - Journal of Economic Dynamics and Control
JF - Journal of Economic Dynamics and Control
IS - 11
ER -