Monitoring Costs and the Mode of International Investment

Abstract

Our central proposition is that monitoring costs increase with physical distance, and hence, direct investments located further from the foreign investor`s home base should be more likely formed as joint ventures. Tests on a data set of Taiwanese direct investments in Mainland China provide robust support to the hypothesis. A project that was located 1000 kilometers further away was 13-17% more likely to be formed as a joint venture. [PUBLICATION ABSTRACT]