When to go it alone: Examining post-conversion performance of international joint ventures

  • Sea-Jin ChangEmail author


This study examines the decision to convert international joint ventures to either foreign or local wholly owned entities and the subsequent impact on performance from the perspective of incomplete contract theory. With China’s relaxation of the joint venture requirement, foreign partners are more likely to take full control and thereby improve performance in provinces with fewer institutional barriers and industries with high intangible asset intensity, while local partners are more likely to do so in provinces with higher institutional barriers and low intangible asset intensity. Furthermore, the performance improvement is more salient when transitioning from foreign minority-local majority joint ventures.


international joint ventures wholly owned subsidiaries acquisition incomplete contract theory property rights theory performance 


Cette étude examine la décision de convertir des coentreprises internationales en entités entièrement détenues par des entreprises étrangères ou locales, ainsi que son impact significatif sur la performance du point de vue de la théorie des contrats incomplets. Avec l’assouplissement des exigences de la Chine concernant les coentreprises, les partenaires étrangers sont plus susceptibles de prendre le contrôle total et d’améliorer de ce fait les performances dans les provinces ayant moins d’obstacles institutionnels et des industries à forte intensité d’actifs intangibles, tandis que les partenaires locaux sont plus susceptibles de le faire dans les provinces ayant des barrières institutionnelles plus fortes et une faible intensité d’actifs intangibles. En outre, l’amélioration de la performance est plus évidente lors de la transition de coentreprises détenues minoritairement par des entreprises étrangères et majoritairement par des entreprises locales.


Este estudio examina la decisión de convertir empresas conjuntas (joint ventures) en ya sea entidades totalmente de propiedad extranjera o local y el impacto posterior en el desempeño desde una perspectiva de la teoría de contratos incompletos. Con la flexibilización de China del requerimiento para empresas conjuntas, es más probable que los socios extranjeros tomen el control total, y por ende mejoren el desempeño en provincias con menos barreras institucionales y en industrias con alta intensidad de activos intangibles, mientras que los socios locales son más propensos a hacerlo en provincias con barreras institucionales mayores y con baja intensidad de activos intangibles. Además, el mejoramiento del desempeño es más destacado cuando se realiza la transición de empresas conjuntas con minoría extranjera y mayoría local.


Este estudo examina a decisão de converter joint ventures internacionais em entidades locais ou estrangeiras totalmente controladas e o subsequente impacto no desempenho sob a perspectiva da teoria de contratos incompletos. Com a flexibilização do requisito de joint venture pela China, é mais provável que parceiros estrangeiros assumam o controle total e, assim, melhorem o desempenho nas províncias com menos barreiras institucionais e indústrias com alta intensidade de ativos intangíveis, enquanto parceiros locais têm maior probabilidade de fazê-lo em províncias com maiores barreiras e menor intensidade de ativos intangíveis. Além disso, a melhoria de desempenho é mais marcante na transição de joint ventures minoritárias em capital estrangeiro para majoritárias em capital local.


本研究考察了将国际合资企业转换为外国或本土全资实体的决定, 以及从不完全契约理论角度对业绩的相应影响。随着中国对合资企业要求的放宽, 外国合作伙伴更有可能完全控制,从而在体制壁垒较少的省份以及在无形资产强度较高的行业改善业绩, 而当地合作伙伴更有可能在体制壁垒较高的省份以及在无形资产强度较低的行业这样做。此外, 从外方少股份- 本土多股份的合资企业转型时,业绩改善更为突出。



I appreciate financial support from the National University of Singapore, Research Grant No. R313-000-086-133 and helpful comments and suggestions from Andrew Delios, Ivan Png, and Kulwant Singh. I also appreciate three anonymous reviewers and Area Editor Tailan Chi for their guidance during the review process.


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Copyright information

© Academy of International Business 2019

Authors and Affiliations

  1. 1.NUS Business SchoolNational University of SingaporeSingaporeSingapore
  2. 2.College of BusinessKorea Advanced Institute of Science and TechnologySeoulSouth Korea

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