Domestic Equity Controls of Multinational Enterprises

Chao, Chi‐Chur; Yu, Eden S. H.

doi:10.1111/1467-9957.00196

Cited by 10 publications

(4 citation statements)

References 11 publications

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“…It has also been argued that by forcing IJVs, a host government can alleviate informational constraints (Karabay 2010) or promote technology spillovers by inducing technology transfer (Mattoo, Olarreaga, and Saggi 2004). Elsewhere, using a general equilibrium model, Chao and Yu (2000) show that under quotas ( resp . under tariffs), raising LERs improves ( resp .…”

Section: Literature Reviewmentioning

confidence: 99%

Why Do Mandated International Joint Ventures Still Exist?

Cai

Karasawa-Ohtashiro

2020

Contemporary Economic Policy

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It is widely believed that restrictions against foreign direct investment (FDI) should be eliminated altogether. However, local equity requirements (LERs) that effectively mandate multinational enterprises (MNEs) to enter through international joint ventures (IJVs) are still common and are seemingly persistent. We seek to understand why and how governments are motivated to adopt LERs. We demonstrate that LERs can in fact be host governments' optimal choices when regulating the entry of MNEs into domestic markets formerly dominated by public firms. (JEL F13, F23, L32) * We wish to thank Tsung-Sheng Tsai, Povilas Lastauskas, session participants at the 94th Annual Conference of the Western Economic Association International and the 2019 Taiwan Economic Association Annual Conference, two anonymous reviewers, and Kwok Ping Tsang (Co-Editor), for their valuable comments. We acknowledge financial support from the JSPS KAKENHI (17K03731, 20K01644, 20K01666), Nanzan University for the Pache Research Subsidy I-A-2 for the 2020 academic year, and Daiko Foundation (No. 11075). An early version of this paper was circulated under a different title "FDI Policy and Mixed International Joint Ventures." The usual disclaimers apply. [Correction added on 4 August 2020 after first online publication: Changes have been made to the following: (1) the first sentence of the Acknowledgment section has been deleted; and (2) the last sentence of Acknowledgement section has been extracted and captured as footnote 12 which resulted to renumbering of footnote and its corresponding citations throughout the article.

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Section: Literature Reviewmentioning

confidence: 99%

Why Do Mandated International Joint Ventures Still Exist?

Cai

Karasawa-Ohtashiro

2020

Contemporary Economic Policy

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“…Very different policy recommendations on domestic equity requirements are required for example, depending on whether imports are restricted by tariffs or by quotas, and depending on the degree of capital mobility. Using a general equilibrium model, Chao and Yu (2000) demonstrated that with quotas, increasing the equity requirements improved welfare in the short run but reduced it in the long run. Conversely, with tariffs, domestic equity requirements lower welfare initially but raise it over the long term.…”

Section: The Trade Regime and Sectoral Considerationsmentioning

confidence: 99%

New Horizons for Foreign Direct Investment

2002

OECD Global Forum on International Investment

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Pursuant to Article 1 of the Convention signed in Paris on 14th December 1960, and which came into force on 30th September 1961, the Organisation for Economic Co-operation and Development (OECD) shall promote policies designed:-to achieve the highest sustainable economic growth and employment and a rising standard of living in Member countries, while maintaining financial stability, and thus to contribute to the development of the world economy;-to contribute to sound economic expansion in Member as well as non-member countries in the process of economic development; and -to contribute to the expansion of world trade on a multilateral, non-discriminatory basis in accordance with international obligations.The original Member countries of the OECD are Austria,

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“…Marjit and Mukherjee (1998) considered various types of contractual arrangements with equity participation by a multinational that dominate pure technology collaboration agreements and established that in the presence of a difference between actual and perceived payoffs, foreign equity participation is necessary. Chao and Yu (2000) demonstrated that when tariffs are in place, a policy of domestic equity requirements lowers welfare in the short run but raises welfare in the long run, and the reverse holds under quotas. Marjit and Mukherjee (2001) showed that technological collaboration coupled with foreign equity participation improves the quality of transacted technology relative to pure technology licensing.…”

Section: Introductionmentioning

confidence: 99%