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Firm's Intangible Assets and Multinational Activity: Joint-Venture Versus FDI

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  • Gattai, Valeria

Abstract

This paper provides a theoretical formalisation of the joint-venture contract, as an alternative to Foreign Direct Investment (FDI), within a Dissipation of Intangible Assets framework. In a two-period, two-country equilibrium model, we discuss how the threat of knowledge spillover shapes the boundaries of a Multinational Enterprise. Similarly to the theoretical findings on the FDI-licensing trade off, we show that Foreign Direct Investment is more likely to emerge when know-how easily spills over - i.e. when firms are endowed with more intangible assets or they belong to high tech industries. Probit estimates, from an entirely new firm-level dataset, constructed by the author, show that the experience of Italian multinationals in Asia is in line with our theoretical predictions.

Suggested Citation

  • Gattai, Valeria, 2005. "Firm's Intangible Assets and Multinational Activity: Joint-Venture Versus FDI," Knowledge, Technology, Human Capital Working Papers 12081, Fondazione Eni Enrico Mattei (FEEM).
    • Handle: RePEc:ags:feemkt:12081
    DOI: 10.22004/ag.econ.12081
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    Cited by:

    1. Dischinger, Matthias & Riedel, Nadine, 2008. "Corporate Taxes, Profit Shifting and the Location of Intangibles within Multinational Firms," Discussion Papers in Economics 4450, University of Munich, Department of Economics.
    2. Becker, Johannes & Riedel, Nadine, 2012. "Cross-border tax effects on affiliate investment—Evidence from European multinationals," European Economic Review, Elsevier, vol. 56(3), pages 436-450.
    3. Dischinger, Matthias & Riedel, Nadine, 2011. "Corporate taxes and the location of intangible assets within multinational firms," Journal of Public Economics, Elsevier, vol. 95(7-8), pages 691-707, August.

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    Keywords

    International Relations/Trade;

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