GEP Research Paper 03/08
Foreign market entry and host-country welfare: a theoretical analysis
A. Mukherjee
This paper is forthcoming in Arthaniti, Vol.2 (2003).
Abstract
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.
Issued in February 2003.
This paper is available in PDF format.