Influences on Foreign Equity Ownership Level in Joint Ventures in China

Abstract

This study examines the determinants of foreign equity ownership in joint ventures in China. Drawing upon Duning's ownership, locational and internalization paradigm and the literature on bargaining power, eleven variables that impact foreign ownership preferences and concessions are examined. These variables are advertising intensity, foreign capital input, country risk of China, EJV investment amount, EJV contractual duration, cultural distance, competitive intensity, local partner state ownership, local partner alignment, foreign partner alignment, and EJV location. The empirical findings are largely consistent with the hypotheses. The empirical findings are largely consistent with the hypotheses. Further, interesting differences were found among U.S., European and Japanese firms with respect to the impact of these determinants.