Ownership Choices of Indian Direct Investors: Do FDI Determinants Differ between Joint Ventures and Wholly Owned Subsidiaries?

Abstract

Using count data on Indian joint ventures (JVs) and wholly owned subsidiaries (WOS), we present an empirical analysis of foreign direct investment (FDI)-related ownership choices and their relation with host country characteristics and indicators of transaction costs. Our Negative Binomial regression models offer only weak support for the bargaining perspective, according to which JVs should be more likely if the host countries were particularly attractive in terms of market access or resource endowments. Geographical and cultural distance has ambiguous effects on the choice between JVs and WOS. The composition of FDI projects tends to shift towards WOS where investment risks are contained by bilateral treaties and better control of corruption. JEL Classification: F21