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Foreign buyout of international equity joint ventures in China: When does performance improve?

Jing-Lin Duanmu and Thomas Lawton

Journal of World Business, 2021, vol. 56, issue 5

Abstract: Since the early 2000s, Sino-foreign equity joint ventures (JVs) have declined sharply as a predominant strategy for multinational enterprises (MNEs) to enter and operate in China. We study one of the contributory factors, foreign buyout, and its performance implications. By applying incomplete contract theory and an agency perspective, we provide micro evidence that superior post buyout performance is observed in converted wholly-owned subsidiaries (WOSs) with efficiency-seeking operations and subsequent CEO succession. The findings extend our understanding that ownership per se does not guarantee performance improvement. Instead, it is the alignment between ownership and the owner's inputs, and between ownership and the owner's managerial control, that give rise to performance improvement.

Keywords: International equity joint venture; Foreign buyout; Firm performance; CEO succession; Agency theory; Incomplete contract theory; Efficiency-seeking FDI; China (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1016/j.jwb.2021.101243

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