International Joint Venture under Asymmetric Information: Technology vis-a-vis Information Advantage

36 Pages Posted: 14 Sep 2007

See all articles by Chifeng Dai

Chifeng Dai

Southern Illinois University at Carbondale - Department of Economics

Sajal Lahiri

Southern Illinois University Carbondale - Department of Economics

Date Written: January 20, 2007

Abstract

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

Dai, Chifeng and Lahiri, Sajal, International Joint Venture under Asymmetric Information: Technology vis-a-vis Information Advantage (January 20, 2007). Available at SSRN: https://ssrn.com/abstract=1014038 or http://dx.doi.org/10.2139/ssrn.1014038

Chifeng Dai

Southern Illinois University at Carbondale - Department of Economics ( email )

Mail Code 4515
Carbondale, IL 62901-4515
United States

Sajal Lahiri (Contact Author)

Southern Illinois University Carbondale - Department of Economics ( email )

MC 415
1000 Faner Drive
Carbondale, IL 62901
United States

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