Uday Bhanu Sinha

"Imitative innovation and international joint ventures: a dynamic analysis"

JEL codes: F23, O31, L13
Keywords: joint ventures, instability, policy uncertainty, imitative innovation

Abstract: In this paper we deal with some dynamic issues of international joint venture formation in the context of a developing country. We provide a rationale for international joint venture formation, as well as its subsequent instability, where instability is interpreted as payoff renegotiations between the partners in the venture. Although the joint venture is formed in response to government restrictions on foreign equity holding in the first period, its subsequent instability is caused by both the change in government policy, as well as the imitative technological innovation by the host partner. It is also shown that uncertainty about the government policy in the second period plays an important role in the formation of the joint venture in the first period.

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