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Why Do Mandated International Joint Ventures Still Exist?

Author

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  • Dapeng Cai
  • Yukio Karasawa‐Ohtashiro

Abstract

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)

Suggested Citation

  • Dapeng Cai & Yukio Karasawa‐Ohtashiro, 2021. "Why Do Mandated International Joint Ventures Still Exist?," Contemporary Economic Policy, Western Economic Association International, vol. 39(1), pages 236-247, January.
    • Handle: RePEc:bla:coecpo:v:39:y:2021:i:1:p:236-247
    DOI: 10.1111/coep.12490
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    References listed on IDEAS

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    1. OKOSHI Hirofumi & Kyikyi Thar, 2023. "Backfired Deregulation of Foreign Ownership Restrictions under Fiscal Competition for Foreign Direct Investment," Discussion papers 23059, Research Institute of Economy, Trade and Industry (RIETI).

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    More about this item

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L32 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Enterprises; Public-Private Enterprises

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