Valeria Gattai

A New Cinderella Story: Joint Ventures and the Property Rights Theory of the Firm

Joint ventures (JVs) are a common form of inter‐firm collaboration and, unsurprisingly, the subject of a vast literature, extending from economics to management and business studies. Issues of control are central to the definition of JVs, and this naturally calls for an interpretation in the context of the property rights theory (PRT) of the firm. In a series of seminal papers, Grossman, Hart and Moore (GHM) offer a rigorous framework to predict the allocation of control rights. Notably, under the standard assumptions of GHM, JVs are suboptimal. However, JVs are not suboptimal in more general settings where a number of the original frameworks assumptions are relaxed. In the context of PRT, this paper surveys more than 20 contributions that address the optimality of JVs under contract incompleteness. The surveyed papers question the assumptions of GHM and reveal the circumstances in which JVs outperform sole ownership. Although contributions are scattered over time and bibliographical sources, we believe sufficient material has accumulated over 25 years of economic modelling to encourage some systematization. The discussion is organized in an intuitive and non‐technical way; in particular, effort is devoted to analysing each paper in detail and providing a unified framework.

Chinese ODI in Italy: An Empirical Investigation at the Firm-Level

This paper provides original evidence about Chinese Outward Direct Investments in Italy. Data have been collected at the micro level, through a multiple-choice questionnaire, designed by the author and submitted to the whole population of Dragon multinationals. With a response rate of 86%, we draw a detailed profile of Chinese parent companies and document their pull, push factors, and entry mode strategies. Empirical findings are consistent with the theoretical literature.

Firm's intangible assets and multinational activity: Full versus shared ownership

This paper analyses the choice of full versus shared ownership of the production affiliate made by Italian multinationals in Asia, based on an entirely new firm-level dataset, constructed by the author. The decision to internalise production, rather than relying on a local partner, is driven by the threat of Dissipation of Intangible Assets, both at a theoretical and an empirical level. In particular, we show that full ownership is more likely to emerge in Asia for Italian firms endowed with better technology and human capital, or belonging to high tech sectors.

Estimating Sourcing Premia Using Italian Regional Data

Abstract This paper explores the link between sourcing and performance for a representative sample of manufacturing firms located in Lombardy, which is the leading region of the Italian economy. The survey estimation methods that we applied to our original database reveal certain performance premia for firms that engage in foreign rather than domestic sourcing and in- rather than outsourcing. This result is robust to different specifications, samples, performance measures, and definitions of sourcing strategies.

Foreign Exposure and Heterogeneous Performance of Italian Firms: A Survey of the Empirical Literature (1992-2014)

This paper surveys 67 contributions on internationalisation and performance of Italian enterprises. It covers empirical studies (including working papers), published between 1992 and 2014, taking a microeconomic perspective and analysing the potential links between firms’ global involvement and heterogeneity in economic, human capital and innovation and financial measures. The discussion is organised in an intuitive and non-technical way. At the same time, we devote particular attention to studying the different papers from many points of view, including their internationalisation measures, performance indicators, empirical approach, causality and results.

The Dragon and the Elephant on the way to Italy

This paper provides original evidence about Chinese and Indian Outward Direct Investment in Italy. Firm-level data have been collected through survey interviews involving the whole population of Dragon and Elephant multinationals. With a response rate of 80%, we draw a detailed profile of the parent companies and investigate their main drivers, entry modes, and satisfaction with the local operations.

Joint Ventures and the Property Rights Theory of the Firm: A Review of the Literature

Joint ventures (JVs) are a very common form of inter-firm collaborations and, not surprisingly, the object of a vast literature, spanning from economics to management and business studies. Issues of control are central to the definition of JV, which naturally begs an interpretation in the context of the property rights theory (PRT) of the firm. In a series of seminal papers, Grossman, Hart and Moore (GHM) offer a rigorous framework to predict the allocation of control rights. Notably, under the standard assumptions of GHM, JVs are suboptimal. However, JVs are not suboptimal in more general settings where some of the original framework’s assumptions are relaxed. In the context of the PRT, this paper surveys more than 20 contributions that deal with the optimality of JVs under contract incompleteness. Questioning GHM’s assumptions, the authors of these contributions unveil relevant circumstances in which JV outperforms sole ownership. Despite contributions being scattered over time and bibliographical space, we believe enough material has accumulated over 25 years of economic modelling to encourage some systematization. The discussion is organized in an intuitive and non-technical way; particular effort is devoted to analyse each contribution in detail and to provide a unitary framework.

ODI from BRIC Countries: A Multi-country Empirical Analysis

In this chapter, we study firm performance and Outward Direct Investment (ODI) from Brazil, Russia, India, and China (BRIC) through a multi-country econometric analysis. First, we present our firm-level data, highlighting distinctive features of the ORBIS database that make it particularly suitable for our purposes. Second, we introduce our taxonomy of ODI, detailing the different classes of ODI involvement that mark our main departure from the literature. Third, we study the ODI involvement and the ODI-performance nexus of BRIC enterprises through econometric analysis. Econometric models and specifications are described in detail and estimation results are presented with the help of summarizing tables. This strategy helps in commenting on the empirical evidence and drawing robust regularities from a multi-country perspective. First, BRIC firms engaged in ODI are in the minority. Second, within the group of investors, those firms having more than five foreign subsidiaries, investing in developing countries, or operating in joint ventures are in the minority. Third, the best performing firms engage in ODI. Fourth, within the group of investors, the best performing firms are more likely to rely on a large number of foreign subsidiaries, and less likely to invest in developing countries alone, or to operate exclusively in joint ventures.

ODI from BRIC Countries: A Single-Country Empirical Analysis

In this chapter, we study Outward Direct Investment (ODI) from Brazil, Russia, India, and China (BRIC) through a single-country econometric analysis. To permit comparisons with our previous results, we study the ODI involvement and the ODI-performance nexus of Chinese and Indian firms using ORBIS firm-level data. The reason for focusing on China and India is twofold: On the one hand, these countries feature prominently in terms of ODI and their governments play an active role in promoting outward orientation of local companies. On the other hand, China and India account for the majority of our sample, permitting robust estimations. Econometric models and specifications are the same as in Chap. 4 and the results are consistent. First, Chinese and Indian firms engaged in ODI are in the minority. Second, within the group of investors, those firms having more than five foreign subsidiaries, investing in developing countries, or operating in joint ventures are in the minority. Third, the best performing firms engage in ODI. Fourth, within the group of investors, the best performing firms are more likely to rely on a large number of foreign subsidiaries, and less likely to invest in developing countries alone, or to operate exclusively in joint ventures.

FDI direction, FDI margin, and heterogeneous firms: evidence from the EU

Abstract This paper takes a firm-level perspective to analyze foreign direct investment (FDI) in the European Union (EU). Our data rely on the global company database Orbis and allow the introduction of an original definition of FDI that accounts for the FDI direction – inward vs. outward – and the FDI margin – extensive vs. intensive. Based on the available information, we ask two questions. First, how deep is the FDI involvement of European enterprises? Second, is there any systematic relationship between FDI involvement and firm-level performance? To answer these questions, we adopt an empirical methodology consisting of descriptive statistics and econometric regressions (Probit, Bivariate Probit, and Poisson models). Concerning the depth of FDI involvement, our descriptive statistics reveal that the number of firms involved in inward/outward FDI is quite notable. However, firms’ actual involvement is rather low, meaning that FDI involvement in the EU is widespread, but not deep. Concerning the relationship between FDI involvement and firm-level performance, our econometric regressions show that better enterprises experience some inward/outward FDI rather than none. Moreover, the deeper the FDI involvement, the wider is the gap with domestic firms. This suggests that performance differentials are related to both the extensive and intensive margins of both inward and outward FDI.