Joint Venture Instability Under Entry
University of Nottingham Research Paper No. 2006/47
24 Pages Posted: 17 Dec 2006
Date Written: 2006
Many developing countries are liberalizing their economies to allow higher equity participation by the foreign firms. We argue that the possibility of joint venture can reduce the number of technology transfers. Hence, joint venture can reduce the welfare of a host-country by creating higher market-concentration. However, higher profit generation under joint venture encourages the foreign firm to transfer relatively better technology and may make the host-country and the firms better-off under joint venture than licensing. For sufficiently large efficiency-gain, the host-country allows fully owned subsidiary of the foreign firm.
Keywords: Joint venture, Licensing, Welfare
JEL Classification: F21, F23
Suggested Citation: Suggested Citation