Imitative innovation and international joint ventures: a dynamic analysis

In this paper we deal with some dynamic issues of international joint ventu re in the context of a developing country. We provide a rationale for inter national joint venture formation, as well as its subsequent instability, wh ere instability is interpreted as payoff readjustments between the partners in the venture. Although the joint venture is formed in response to govern ment restrictions on foreign equity holdings in the first period, its subse quent instability is caused by both the change in government policy, as wel l as the outcome of imitative technological innovation undertaken by the ho st partner. It is also shown that uncertainty about the government policy i n the second period plays an important role in the formation of joint ventu re in the first period. (C) 2001 Elsevier Science BY. All rights reserved.