Contractual relations, foreign direct investment, and technology transfer: The case of China

This paper discusses in terms of transactions costs how foreign investors choose contractual forms. It argues that the unusually wide choice of contracts available in China can be shown roughly to correspond to varying degrees of within‐firm governance. Other factors, particularly locational choice within China, contribute to reducing the scope for opportunism on the part of the host country where a well‐enforced legal framework is lacking. Technology transfer is rendered more complex by the importance of team organization in the technology on offer from firms from Hong Kong, the largest foreign investor.