The influence of subnational corruption on the conversion of foreign proprietorship: Stumbling block or lubricant? Evidence from Sino-foreign joint ventures

Ting Liu () and Ye Huang ()
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Ting Liu: Hunan Normal University
Ye Huang: Xiangtan University

Asia Pacific Journal of Management, 2024, vol. 41, issue 1, No 6, 135-170

Abstract: Abstract Existing research shows that subnational corruption can be used to expound the ownership choices of foreign firms entering a new foreign market. Yet, most studies either overlook the evolution of foreign firms’ ownership structure after entering the host market, or mainly focus on the national level. This study investigates how subnational corruption affects the conversion of Sino-foreign joint ventures (JVs) into wholly foreign-owned enterprises (WFOEs) in China. In a sample of Sino-foreign JVs operating in China between 1998 and 2007, we find that the relationship between subnational corruption and the conversion of foreign proprietorship of Sino-foreign JVs is U-shaped. Furthermore, the U-shaped relationship between subnational corruption and the conversion of foreign proprietorship of JV is stronger when the JV is in a higher degree of marketization, while it is weaker when the local partner is a state-owned enterprise (SOE) rather than a privately owned enterprise (POE). Overall, our findings emphasize how subnational corruption shapes the dynamic ownership choices of foreign firms operating in the host market.

Keywords: Subnational corruption; Sino-foreign joint venture (JV); Foreign proprietorship; Marketization; Local state ownership (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s10490-022-09841-w

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