Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/208403 
Year of Publication: 
1998
Series/Report no.: 
Working paper No. 10-98
Publisher: 
Copenhagen Business School (CBS), Department of Economics, Frederiksberg
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 in- vestments by the domestic firm and the foreign investor, together with a buy-out option to the investor, can be used to separate good and bad invest- ment prospects in equilibrium. However, non-revealing equilibria may exist. Implications for foreign direct investment are traced and briefly related to the experience of transition economies.
Subjects: 
investment
complementary assets
partnerships
joint ventures and licensing
costly signaling
JEL: 
D8
F2
L14
O12
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Working Paper

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