Partnership, buy-out options and investment in emerging markets

Peter Møllgaard, Per Baltzer Overgaard

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

Asymmetric information and fear of acquiring a “lemon” may explain the paucity of foreign investment in emerging market economies. If investors are uncertain about the profitability of investments, intrinsically inefficient, temporary partnerships or joint ventures may serve as mechanisms through which information is transmitted. Temporary partnerships with joint investments by the domestic firm and the investor, together with a buy-out option to the investor, may sometimes separate good and bad investment prospects in equilibrium. However, separating equilibria may fail to exist. Implications for foreign direct investment are traced and briefly related to the experience of transition economies. Jel classification: d8; f2; l14; o12.
Original languageEnglish
Pages (from-to)651-672
Number of pages22
JournalScandinavian Journal of Economics
Volume101
Issue number4
DOIs
Publication statusPublished - 1999
Externally publishedYes

Keywords

  • Internationale joint ventures Virksomhedsovertagelser

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