Influences on Foreign Equity Ownership Level in Joint Ventures in China
- PDF / 9,177,195 Bytes
- 26 Pages / 450 x 771 pts Page_size
- 6 Downloads / 211 Views
Palgrave Macmillan Journals is collaborating with JSTOR to digitize, preserve, and extend access to Journal of International Business Studies ® www.jstor.org
2
JOURNAL OF INTERNATIONALBUSINESSSTUDIES, FIRST QUARTER1996
foreign partners in an EJV, the choice of EJV location in China, and the EJV contractual duration. The empirical results show that these new variables contribute to the explanation of foreign EJV ownershipstrategiesin China. Second, most previous research on equity ownership tends to be limited to a single source country. For instance, some studies focused on the ownership strategy of U.S. firms in their overseas operations (e.g., Gatignon and Anderson [1988]), and others examined the Japanese ownership strategies in the U.S. (e.g., Hennart [1991]).While some interesting differencesin ownership strategies between U.S. and Japanese firms appear to exist [Hennart 1991], much remains to be verified and established regarding the possible differences in overseas ownership strategies of firms from various countries. This study attempts to explore the differences in U.S., European and Japanese EJV ownership strategies abroad. In order to do so, EJVs involving U.S., European and Japanese partners located in a third country such as China become ideal subjects of investigation. Finally, many previous studies on foreign investment in China adopted a static approach and employed a small sample (e.g., Shan [1991]) (see the review by Beamish [1993]).The empirical investigation of this study was based on a large longitudinal sample of 4223 foreign EJVs in China between 1979 and 1992. For instance, the effect of country risk of China on foreign equity ownership is examined over this fourteen-year period. The next section discusses the conceptualization of ownership determinants. The subsequent section presents the database and variables. Then, results of analysis are discussed. The final section points out the implications of this study, its limitations, and the direction for future research. CONCEPTUALIZATION The distribution of EJV ownership is the outcome of a negotiation process between the venture partners. Foreign equity ownership in an EJV reflects both what the foreign firm wants (ownership preferences) and what it can or can not get from the local side (ownership concessions) [Gomes-Casseres 1990]. Several recent studies have successfully applied the transaction cost theory to explain foreign ownership preferences (e.g., Gomes-Casseres [1989]; Hennart [1991]). The transaction cost explanation for joint ventures involves the question of how a firm should organize its boundary activities with other firms. Firms should decide according to the criterion of minimizing the transaction costs and production costs [Caves 1982; Dunning 1980,1989; Killing 1983; Kogut 1988; Root 1987; Stopford and Wells 1972; Williamson 1985,1986]. In a broad sense, the transaction costs include costs associated with various aspects of dealing with other firms, such as cost of monitoring, controlling and inspecting product quality,
Data Loading...
