Foreign direct investment, intra-firm trade and ownership structure

Asymmetric information about true opportunity cost in trade between a multinational and its foreign affiliate can alleviate the hold-up problem in foreign direct investment. Selling shares in the affiliate to locals is also beneficial because it increases the parent multinational's information rent that is protected from a host government's confiscatory taxation, (C) 2001 Elsevier Science B.V. All rights reserved.