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Article: Foreign Direct Investment and Contract Enforcement

TitleForeign Direct Investment and Contract Enforcement
Authors
Issue Date1998
PublisherAcademic Press. The Journal's web site is located at http://www.elsevier.com/locate/jce
Citation
Journal Of Comparative Economics, 1998, v. 26 n. 4, p. 761-782 How to Cite?
AbstractA long-standing deterrent to foreign direct investment in developing countries is weak enforcement of binding contracts. A local firm may learn business skills from a cooperating multinational firm and subsequently do business on its own based on the acquired skills. In a two-period, double-moral-hazard model, non-binding contracts are shown to be preferred by all parties, implying that contract enforcement is unnecessary. Our results shed light on the puzzling phenomenon that substantial FDI has been carried out under contractual arrangements in developing countries in which contract enforcement is problematic. They can also explain some interesting stylized facts on contractual joint ventures between multinationals and local firms in the early stage of an economic transition.J. Comp. Econom.,December 1998, 26(4), pp. 761-782. School of Business, The University of Hong Kong, Hong Kong; and Hong Kong University of Science and Technology, Clear Water Bay, Hong Kong. © 1998 Academic Press.
Persistent Identifierhttp://hdl.handle.net/10722/85833
ISSN
2015 Impact Factor: 1.38
2015 SCImago Journal Rankings: 1.066
ISI Accession Number ID
References

 

DC FieldValueLanguage
dc.contributor.authorTao, Zen_HK
dc.contributor.authorWang, Sen_HK
dc.date.accessioned2010-09-06T09:09:46Z-
dc.date.available2010-09-06T09:09:46Z-
dc.date.issued1998en_HK
dc.identifier.citationJournal Of Comparative Economics, 1998, v. 26 n. 4, p. 761-782en_HK
dc.identifier.issn0147-5967en_HK
dc.identifier.urihttp://hdl.handle.net/10722/85833-
dc.description.abstractA long-standing deterrent to foreign direct investment in developing countries is weak enforcement of binding contracts. A local firm may learn business skills from a cooperating multinational firm and subsequently do business on its own based on the acquired skills. In a two-period, double-moral-hazard model, non-binding contracts are shown to be preferred by all parties, implying that contract enforcement is unnecessary. Our results shed light on the puzzling phenomenon that substantial FDI has been carried out under contractual arrangements in developing countries in which contract enforcement is problematic. They can also explain some interesting stylized facts on contractual joint ventures between multinationals and local firms in the early stage of an economic transition.J. Comp. Econom.,December 1998, 26(4), pp. 761-782. School of Business, The University of Hong Kong, Hong Kong; and Hong Kong University of Science and Technology, Clear Water Bay, Hong Kong. © 1998 Academic Press.en_HK
dc.languageengen_HK
dc.publisherAcademic Press. The Journal's web site is located at http://www.elsevier.com/locate/jceen_HK
dc.relation.ispartofJournal of Comparative Economicsen_HK
dc.titleForeign Direct Investment and Contract Enforcementen_HK
dc.typeArticleen_HK
dc.identifier.openurlhttp://library.hku.hk:4550/resserv?sid=HKU:IR&issn=0147-5967&volume=26&spage=761&epage=782&date=1998&atitle=Foreign+Direct+Investment+and+Contract+Enforcementen_HK
dc.identifier.emailTao, Z: ztao@hku.hken_HK
dc.identifier.authorityTao, Z=rp01097en_HK
dc.description.naturelink_to_subscribed_fulltext-
dc.identifier.doi10.1006/jcec.1998.1551en_HK
dc.identifier.scopuseid_2-s2.0-0038907451en_HK
dc.identifier.hkuros43990en_HK
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-0038907451&selection=ref&src=s&origin=recordpageen_HK
dc.identifier.volume26en_HK
dc.identifier.issue4en_HK
dc.identifier.spage761en_HK
dc.identifier.epage782en_HK
dc.identifier.isiWOS:000078020500008-
dc.publisher.placeUnited Statesen_HK
dc.identifier.scopusauthoridTao, Z=7201884505en_HK
dc.identifier.scopusauthoridWang, S=7410349142en_HK

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