Skip to main content
Frontiers of Business Research in China
Download PDF

Why TNCs try to make their subsidiaries sole proprietorship enterprises in China?

—An analysis of TNCs’ strategy on equity ownership structure

Frontiers of Business Research in China volume 1, pages 365–377 (2007)Cite this article

Abstract

A review on the evolution of the Transnational Corporations’ (TNCs) equity ownership structure in their subsidiaries in recent 20 years reveals an increasingly clear preference for sole proprietorship. Based on results of the prior researches, this paper presented a two-stage evolutionary model to explain the underlying reasons of the tendency in China. It is shown that the TNCs’ strategic choice for their subsidiaries’ equity ownership structure is a decision-making process and result, which makes the parent company, as the principal part, based on the current business strategies of the parent company (local or global integration) at the premise of the investment environment of host country, pursue possibly unproductive receipts by choosing or changing the structure of the equity ownership.

摘要

考察20多年来跨国公司在华企业的股权结构变动趋势,可发现其独资倾向日益明显。 借鉴国内外学者关于跨国公司股权结构战略的研究成果,在东道国为新兴市场经济国家前提下, 可提出一个跨国公司股权结构战略两阶段演进模型, 从而揭示跨国公司在华独资倾向增强的深层原因, 即追求股权结构战略改进的预期收益。

References

  • Anderson E, Gatignon H (1986). Modes of foreign entry: A transaction cost analysis and proposition. Journal of International Business Studies, 17(3): 1–26

    Article  Google Scholar 

  • Beamish P W, Banks J C (1987). Equity joint ventures and the theory of the multinational enterprise. Journal of International Business Studies, 18(2): 1–16

    Article  Google Scholar 

  • Buckley P, Casson M (1976). The Future of the Multinational Enterprises. New York: Homes & Meier

    Google Scholar 

  • Casson M C (1987). The Firm and Market: Studies on Multinational Enterprises and the Scope of the Firm. Oxford: Brasil Blackwell

    Google Scholar 

  • Caves R, Mehra S (1986). Entry of foreign multinationals into U.S. manufacturing industries. In M. Porter (Ed.), Competition in Global Industries (pp. 449–481). Boston: Harvard Business School Press

    Google Scholar 

  • Contractor F J, Lorange P (1988). Cooperative strategies in international business. Toronto: Lexington Books

    Google Scholar 

  • Delios A, Beamish P W (1999). Ownership strategy of Japanese firms: Transactional, institutional, and experience influences. Strategic Management Journal, (20): 915–933

  • Dunning J H (1995). Reappraising the eclectic paradigm in an age of alliance capitalism. Journal of International Business Studies, 26(3): 461–491

    Article  Google Scholar 

  • Fagre N (1982). Bargaining power of multinationals and host governments. Journal of International Business Studies, (3): 9–23

  • Gomes-Casseres B (1989). Ownership structures of foreign subsidiaries: Theory and evidence. Journal of Economic Behavior and Organization, 11: 1–25

    Article  Google Scholar 

  • Gomes-Casseres B (1990). Firm ownership preferences and host government restrictions: An integrated approach. Journal of International Business Studies, (1): 1–22

  • Hennart J F (1982). A theory of multinational enterprise. Ann Arbor: University of Michigan Press

    Google Scholar 

  • Hymer S H (1960). The international operations of national firms: A study of direct foreign investment. Ph. D. dissertation. Cambridge: MIT Press

    Google Scholar 

  • Kang Rongping (2001). The New Trend of Large Transnational Corporations’ Strategy. Economic Science Press

  • Kobrin S J (1988). Expatriate reduction and strategic control in American multinational corporations. Human Resource Management. 27(Spring): 63–75

    Article  Google Scholar 

  • Lecraw D J (1984). Bargaining power, ownership, and profitability of transnational corporations in developing. Journal of International Business Studies. 3(2): 27–43

    Article  Google Scholar 

  • Li Wei’an (2001). The survey report on corporate governance issues of three kinds of foreign-invested enterprises or ventures in China. The Thematic Speech in TNCs’ Corporate Governance Academic Conference (in Chinese)

  • Liang Neng (1995). The Transnational Corporations Operating Studies. Shanghai: Shanghai Renmin Press (in Chinese)

    Google Scholar 

  • Liu Haiyun (2001). The Advantages Change of TNCs’ Operating. Ghongguo Fazhan Press (in Chinese)

  • OECD (2000). Main determinants and impacts of foreign direct investment on China’s economy. OECD Working papers on International investment, 2000/4, www.oecd.org

  • Pan Yigang (1996). Influence on foreign equity ownership level in joint ventures in China. Journal of International Business Studies, 27(1): 1–27

    Article  Google Scholar 

  • Park B, Lee K (2001). Comparative analysis of foreign direct investment in China: The Korean, the Hong Kong, and the United States firms in the Shandong Province. Working paper: http://econ.snu.ac.kr/:_ecores/english/disc2.htm

  • Rugman A M (1981). Inside the multinationals: The economics of internal markets. London: Croom Helm

    Google Scholar 

  • Stopford J M, Wells L T (1972). Managing the Multinational Enterprises: Organization of the Firm and Ownership of the Subsidiaries. New York: Basic Books Inc.

    Google Scholar 

  • Vanhonacker W (1997). Entering China: An unconventional approach. Harvard Business Review, 75(2): 130–137

    Google Scholar 

  • Wang Linchang, Xuan Hailin, Zheng Ming (2002). The increase in the number of wholly foreign-owned enterprises and related effects. Journal of Reform, (1): 44–47 (in Chinese)

  • Williamson O E (1975). Markets and hierarchies: Analysis and antitrust implications. New York: Free Press

    Google Scholar 

  • Wu Wenwu (2000). New Study on TNCs. Beijing: Peking University Press

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Business School, Nankai University, Tianjin, 300071, China

    Li Wei’an

  2. Industrial and Commercial Bank of China (ICBC), Beijing, 100032, China

    Li Baoquan

Authors
  1. Li Wei’an
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Li Baoquan
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Li Wei’an.

Additional information

Translated from Guangli Shijie 管理世界 (Business World), 2003, (1): 57–62

Rights and permissions

Reprints and Permissions

About this article

Cite this article

Li, W., Li, B. Why TNCs try to make their subsidiaries sole proprietorship enterprises in China?. Front. Bus. Res. China 1, 365–377 (2007). https://doi.org/10.1007/s11782-007-0021-0

Download citation

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11782-007-0021-0

Keywords

  • Transnational Corporations (TNCs)
  • sole proprietorship in joint ventures
  • strategy on equity ownership structure

关键词

  • 跨国公司
  • 独资倾向
  • 股权结构战略