This paper deals with the issue of instability of joint ventures in the context of international investment. In an adverse selection framework, we show (a) the partial share adjustment of a joint venture by a multinational corporation (MNC) and (b) the possibility of setting up a subsidiary by the MNC to compete with its existing joint venture counterpart. In our principal agent framework of buy-out, we find an interesting implication that under certain parameter configurations, the principal (MNC) prefers to offer a pooling contract as opposed to a separating contract, thereby deciding not to acquire the agent's true private information.