Shared Equity Policy in Joint Ventures for Host Countries

This paper provides a game model for examining the host overseas investment policy and MNEs equity strategy in international joint ventures. This paper refines previous Chen & Chung’s (2008) results and considers the host policy about MNEs’ joint-venture. This paper shows foreign firms increase their technology transfer incentive because less competition from the joint-venture partner when a foreign firm holds lower shares. And the holding shares of foreign firms must be not smaller than 50 percent. The host welfare increases with foreign firms’ minority equity. The equity conflict exists in the higher technology spillover and transfer cost cases. Hence, the host governments always impose investment restrictions on MNEs in the Developing countries. Otherwise, it has more loose policy in the Developed countries.