Technological Leadership and the Choice of Entry Mode by Foreign Investors

36 Pages Posted: 8 Feb 2000

See all articles by Beata Smarzynska Javorcik

Beata Smarzynska Javorcik

University of Oxford - Department of Economics; World Bank - Development Research Group (DECRG); Centre for Economic Policy Research (CEPR)

Date Written: January 2000

Abstract

Developing country governments tend to favor joint ventures (JVs) over other forms of foreign direct investment, since they believe that local participation facilitates transfer of technology and marketing skills. This study assesses the potential of JVs for such transfers by comparing characteristics of foreign investors engaged in JVs and wholly owned projects in transition economies in the early 1990s. In contrast to the existing literature, it focuses on intra- rather than interindustry differences in R&D and advertising intensities. The empirical analysis shows that foreign investors that are technological or marketing leaders in their industries are more likely to engage in wholly owned projects than to share ownership. These effects are present in high and medium technology sectors but not in low R&D industries. The study concludes that it is not appropriate to treat industries as homogenous in investigations of investment modes. It also suggests that JVs in high R&D sectors may present a lower potential for transfer of technology and marketing techniques than wholly owned subsidiaries.

JEL Classification: F23

Suggested Citation

Javorcik, Beata Smarzynska, Technological Leadership and the Choice of Entry Mode by Foreign Investors (January 2000). Available at SSRN: https://ssrn.com/abstract=208615 or http://dx.doi.org/10.2139/ssrn.208615

Beata Smarzynska Javorcik (Contact Author)

University of Oxford - Department of Economics ( email )

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HOME PAGE: http://econ.worldbank.org/staff/bjavorcik

Centre for Economic Policy Research (CEPR)

London
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