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When do wholly owned subsidiaries perform better than joint ventures?

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  • Sea‐Jin Chang
  • Jaiho Chung
  • Jon Jungbien Moon

Abstract

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. Copyright © 2012 John Wiley & Sons, Ltd.

Suggested Citation

  • Sea‐Jin Chang & Jaiho Chung & Jon Jungbien Moon, 2013. "When do wholly owned subsidiaries perform better than joint ventures?," Strategic Management Journal, Wiley Blackwell, vol. 34(3), pages 317-337, March.
    • Handle: RePEc:bla:stratm:v:34:y:2013:i:3:p:317-337
    DOI: 10.1002/smj.2016
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    Cited by:

    1. Seungrae Lee & Seung Jae Park & Sridhar Seshadri, 2023. "Variations of the Bullwhip Effect Across Foreign Subsidiaries," Manufacturing & Service Operations Management, INFORMS, vol. 25(1), pages 1-18, January.
    2. Gwendolyn K. Lee & Rich Bettis, 2023. "Structural Causal Modeling of Managerial Interventions: What If Managers Had Not Intervened by Doing This?," Strategy Science, INFORMS, vol. 8(1), pages 24-43, March.
    3. Andrew Delios & Tianyou Hu & Shu Yu & Nan Zhou & Faisal M. Ahsan & Mona Bahl & Tao Bai & Madhurima Basu & Hanoku Bathula & Georgios Batsakis & Jorge Carneiro & Dwarka Chakravarty & Danyang Chen & Weih, 2025. "The insights from the crowd: Drawing inferences from many approaches to key empirical questions in international business," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 56(9), pages 1102-1124, December.

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