Indrani Roy Chowdhury

A theory of joint venture life-cycles

Abstract In this paper we provide a dynamic theory of joint venture life cycle that relies on synergy, organisational learning and moral hazard. We demonstrate that depending on parameter values the outcome may involve any one of the following: stable joint venture formation, joint venture formation followed by breakdown, or Cournot competition in all the periods. We also provide some interesting welfare results.

International Joint Ventures: A Welfare Analysis

We examine the welfare implications of joint venture formation between an MNC and a firm from a less developed country (LDC). For symmetric firms greater the market size, greater is the incentive for joint venture formation. Moreover, joint venture formation is welfare reducing for both high, as well as low levels of demand. However, if the MNC is more efficient compared to the LDC firm then the results are different. We find that smaller the market size greater the incentive for joint venture formation. Moreover, joint venture formation is welfare enhancing for both high, as well as low levels of demand.

A Learning-Based Theory of Joint Venture Life-Cycles

We provide a two period, learning-based model of joint venture formation and breakdown. We show that depending on parameter values different dynamic patterns emerge. If the rate of learning is low, then a joint venture forms in both the periods. If the rate of learning is large, then the outcome may either involve joint venture breakdown, or delayed joint venture formation.We provide a two period, learning-based model of joint venture formation and breakdown. We show that depending on parameter values different dynamic patterns emerge. If the rate of learning is low, then a joint venture forms in both the periods. If the rate of learning is large, then the outcome may either involve joint venture breakdown, or delayed joint venture formation.

Joint Ventures, Pollution and Environmental Policy

We examine the impact of emission taxes on the pollution level in a duopoly framework with endogenous market structure. We demonstrate that an increase in emission taxes could trigger a regime switch from joint ventures to Cournot competition, causing the pollution level to increase. Such a phenomenon is likely to happen when the concerned industry is reasonably profitable, and the synergistic gain between joint venture partners is not too strong. Moreover, emission taxes can implement the first best outcome if and only if the industry is not too polluting. In case it is, the second best level of taxes may or may not equal the optimal tax under either joint venture or Cournot competition.

Environmental regulation, green R&D and the Porter hypothesis

Purpose - The purpose of this paper is to examine the effects of environmental regulation on green R&D, as well as to characterize the conditions under which the Porter hypothesis, both the weak as well as the strict version, may or may not hold. Design/methodology/approach - The authors use a simple two-stage model with environmental R&D and endogenously determined abatement costs to address these issues. Findings - In a monopoly framework, the authors identify a channel arising out of the replacement effect that may increase R&D incentives following stricter regulation. It was found that the Porter hypothesis, both the weak as well as the strong version, is likely to hold if the new technology is relatively efficient in production, but not otherwise. Originality/value - The paper makes a contribution towards the debate on the relationship between environmental regulation and green R&D, in particular the extremely influential Porter hypothesis.

Public–Private Partnerships, Corruption and Inefficiency

The chapter examines the formation of public–private partnerships (PPPs), one of the most important organizational forms to evolve over the last few decades. In particular, we analyse a possibility that has been relatively under-analysed in the literature, namely the possibility of collusion between the private firm and the governmental department in case of PPP formation. The chapter first develops a simple formal model based on risk sharing that is capable of analysing this issue. It then shows that PPPs are more likely to form in case the externality gains out of the project are significant, and the agents are quite risk averse. Otherwise, PPP formation may lead to bribery and sub-optimal project choice, and the government may opt for government control instead.

Public–Private Partnerships, Commitment and X-Inefficiency

We examine the formation of public–private partnerships (PPPs), one of the most important organisational forms to evolve over the last few decades. Given the volume of infrastructural investment required, PPPs seem essential for Indias development. We unearth a role for PPP formation that is new in the literature, namely its role as a commitment device. In particular, we argue that the presence of the private firm allows a PPP to credibly commit to discontinuing the project when efficiency considerations demand so. JEL: D02, D04,D72, D73, D43

Revisiting Strategic Trade Theory

This chapter reviews some important issues of strategic trade literature that use the assumption of imperfect competition and increasing returns of scale. One of the seminal papers by Krugman (Import protection as export promotion: international competition in the presence of oligopoly and economies of scale. Kierzkowski H (ed) Monopolistic competition and international trade. Oxford University Press, Oxford, 1984) seeks to formalize the notion that import protection leads to export promotion in the presence of economies of scale (both static and dynamic). However, Krugman argues that in the absence of dynamic scale economies, the formalization of this idea appears to require the “heterodox” assumption that marginal costs are decreasing. This chapter seeks to extend Krugman by providing an alternative foundation for the idea based on free entry and linear marginal costs. Interestingly, the welfare implications are sensitive to whether there is free entry in only one of the countries, or both, as well as to whether import protection is of the tariff or the nontariff kind.

Public–Private Partnerships and Governance

We examine the formation of public-private partnerships (PPPs), one of the most important organisational forms to evolve over the last few decades. Given that PPPs seem to have been incubated by the developed world (in particular the UK), with their relatively stronger governance structures, we examine if there is any fundamental reason why countries with stronger governance levels are more likely to opt for PPPs. In a bid to contextualise this issue, we begin by discussing the institutional structure of PPPs, as well as how they fare globally. We first discuss the trade-offs involved in the formation of PPPs. We then use this framework to develop a simple formal model based on risk sharing that is capable of analysing this issue. We show that PPPs are more likely to form in case governance is strong. Otherwise, PPPs are unlikely to form, and will be susceptible to contract renegotiation in case they do form.

Persistence of Jhum Cultivation: Social Capital and Labour Market

The study seeks to analyse the persistence of Jhum cultivation—a predominant mode of agricultural practice in many hilly regions of the world, including Northeast India. We build a formal game theoretic model that tries to explain how the existence of social capital can lead to persistence of Jhum. We find that all equilibria involve too much labour being allocated to Jhum, compared to the case where there is no social capital. The intuition relies on the fact that the amount of labour being employed by the two households are strategic complements. Turning to the comparative statics, we find that the results depend on whether the equilibrium is a corner one or not. We find that under the appropriate parameteric restrictions, there is a unique Nash equilibrium where all of the labour is employed in Jhum cultivation. In this case, we find that an increase in outside wages has no impact on labour allocated to Jhum, thus providing a theory of persistence of Jhum. Interestingly, we find that in the absence of social capital, such persistence cannot arise. The study is important for policy perspective, particularly in the context of transition economies, where a subsistence form of production suffers from a typical inertia of persistence. While jhum offers a limited scope to grow beyond subsistence, a standard incentive approach may not work to draw labour away from such subsistence practice.