Monitoring costs and the mode of international investment

Our central proposition is that monitoring costs increase withphysical distance, and hence, direct investments located furtherfrom the foreign investor's home base should be more likelyformed as joint ventures. Tests on a data set of Taiwanese directinvestments in Mainland China provide robust support to thehypothesis. A project that was located 1000 kilometers furtheraway was 13–17% more likely to be formed as a joint venture.