When do wholly owned subsidiaries perform better than joint ventures?

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This study explores when wholly owned subsidiaries outperform joint ventures with local partners. In order to avoid the endogeneity problem inherent in foreign subsidiaries' operating mode decisions that might confound performance measurement, we employ the propensity score matching method, along with the difference-in-differences approach, and compare the performances of joint ventures turned wholly owned subsidiaries vis-à-vis continuing joint ventures. Based on foreign subsidiaries' financial data in China for 1998–2006, we find strong evidence that converted wholly owned subsidiaries outperform continuing joint ventures in industries characterized by high levels of intangible assets such as technology or brand, after controlling for factors that may affect the conversion decision. This finding is consistent with the prediction of transaction cost theory.
Publisher
WILEY-BLACKWELL
Issue Date
2013-03
Language
English
Article Type
Article
Citation

STRATEGIC MANAGEMENT JOURNAL, v.34, no.3, pp.317 - 337

ISSN
0143-2095
DOI
10.1002/smj.2016
URI
http://hdl.handle.net/10203/191215
Appears in Collection
MT-Journal Papers(저널논문)
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