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Christian-Albrechts-Universität zu Kiel

Institut für Volkswirtschaftslehre - Department of Economics
Economics Working Papers

Economics Working Papers: Abstract 2007-18


Nummer

2007-18

Autoren

Horst Raff, Michael Ryan, Frank Stähler

 

Titel

 

Whole versus Shared Ownership of Foreign Affiliates
Abstract This paper studies why multinational firms often share ownership of a foreign affiliate with a local partner even in the absence of government restrictions on ownership. We show that shared ownership may arise, if (i) the partner owns assets that are potentially important for the investment project, and (ii) the value of these assets is private information. In this context shared ownership acts as a screening device. Our model predicts that the multinational’s ownership share is increasing in its productivity, with the most productive multinationals choosing not to rely on a foreign partner at all. This prediction is shown to be consistent with data on the ownership choices of Japanese multinationals.

Keywords: Foreign direct investment, ownership, joint venture, productivity

JEL classification: F23, L20

 

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