Technological Leadership and Foreign Investors' Choice of Entry Mode
Developing country governments tend to favor joint ventures over other forms of foreign direct investment, believing that local participation facilitates the transfer of technology, and marketing skills. The author assesses joint ventures' pot...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2000/04/437881/technological-leadership-foreign-investors-choice-entry-mode http://hdl.handle.net/10986/18834 |
| Summary: | Developing country governments tend to
favor joint ventures over other forms of foreign direct
investment, believing that local participation facilitates
the transfer of technology, and marketing skills. The author
assesses joint ventures' potential for such transfers
by comparing the characteristics of foreign investors
engaged in joint ventures with those of foreign investors
engaged in wholly owned projects in transition economies in
the early 1990s. Unlike the existing literature, the author
focuses on intra-industry differences rather than
inter-industry differences in research and development, and
advertising intensity. Empirical analysis shows that foreign
investors who are technological, or marketing leaders in
their industries, are more likely to invest in wholly owned
projects than to share ownership. This is true in high- and
medium-technology sectors, but not in industries with low
research and development spending. The author concludes that
it is inappropriate to treat industries as homogeneous in
investigating modes of investment. She also suggests that in
sectors with high research and development spending, joint
ventures may present less potential for transfer of
technology, and marketing techniques than wholly owned subsidiaries. |
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