“
BEHIND
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THE
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BORDER
” CONSTRAINTS ON AFRICAN
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ASIAN
TRADE AND INVESTMENT FLOWS191
eign firms, while they are equally productive based on capital productivity.
Joint venture firms also export more intensively than do foreign firms.
Superiority of performance of joint ventures relative to foreign firms is at variance with some findings in other regions.
6
In certain cases, joint ventures are imposed by host-country governments as a condition for foreign investment. In general, it is believed that requiring a local partner weakens the export performance of joint venture firms relative to firms wholly owned by foreigners.
7
On
the other hand, particularly in the context of
African countries, where business transaction costs and business-related risks
are often perceived to be high, joint venture firms may enjoy certain advantages. Unless firms intend to operate in isolated enclaves entirely detached from local economies, linking with local partners could mitigate risks associated with local transactions, making joint ventures a preferred option for many foreign investors.
8
This has been
the casein other countries, such as in Latin America. The fact that such advantage in local transactions is often embodied in labor rather than capital may help explain the observed contrast in productivity between joint ventures and foreign- owned firms that is, while there is little difference in capital productivity,
joint ventures exhibit superior performance in terms of labor productivity.
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