Hongkong and Shanghai Banking Corporation Ltd, Republic of China
University of Guelph, Guelph, Ontario N1G 2W1, Canada
University of Southampton, Southampton SO9 5NH, UK
Abstract:
Contractual joint ventures (CJVs) and the buyback form of countertrade are popular methods that Socialist countries use to attract foreign investment. In this paper we explore some reasons why this is so and also explain two predominant characteristics of these contracts: the existence of sharing rules and minimum standard requirements on inputs. The model stresses the incentive problems involved when a (Socialist) host country, which does not allow foreign direct investment, uses a CJV to obtain the fruits of some knowledge-based production process from a multinational enterprise.