The Business Environment for IJV Formation in LDCs: A Case Study

Abstract

Until the early 1980s, foreign capital was widely regarded as violation of sovereignty in many less developed countries (LDCs) in general and newly independent countries in particular. In many LDCs, including sub-Saharan African countries (SSACs), colonial administration appeared to have left an intense mistrust — a feeling that domestic resources would inevitably be exploited by foreign capital (Oman, 1989; Akinsanya, 1989). More recently, however, the policies and attitudes of governments of LDCs are said to have changed. The last two decades had seen a shift in government policies of LDCs in order to attract foreign direct investment. Generally, restrictive regulations have given way to reducing obstacles and restrictions, and to granting guarantees and incentives. Many governments of LDCs have adopted a policy of encouraging private foreign investment mainly in the form of joint ventures (JVs) to overcome their investment and technological problems, and ultimately to achieve their economic development goals.