Skip to main content
Disciplines
Automotive Business IT + Informatics Construction + Real Estate Electrical Engineering + Electronics Energy + Sustainability Insurance + Risk Finance + Banking Management + Leadership Marketing + Sales Mechanical Engineering + Materials
Events
DE
EN
Books
Journals
Topic Page
Marketing
Start single access now
Access for companies
EXTENDED SEARCH
Log in
Top
Asia Pacific Journal of Management
Published in: Asia Pacific Journal of Management 1/2019

21-12-2017

An institutional response model to economic liberalization: Japanese MNEs’ ownership choices in China

Authors: Megan Min Zhang, Paul W. Beamish

Published in: Asia Pacific Journal of Management | Issue 1/2019

Log in

Activate our intelligent search to find suitable subject content or patents.

search-config
loading …

Abstract

This study investigates how Japanese MNEs are adapting their ownership choices to accommodate China’s economic liberalization. Drawing upon the institution-based view of the firm, we propose an institutional response model that is simultaneously based on the progress of economic liberalization and the accumulation of subsidiary experience. This model suggests that Japanese MNEs increasingly adopt higher ownership levels in their subsidiaries because of the combined effects of deepening deregulation on foreign investments, declining pure uncertainty, and increasing contingent uncertainty during economic liberalization. It also suggests that the progress of economic liberalization continuously changes the combination of the two types of institutional uncertainty (pure and contingent), contextualizing the influence of subsidiary experience on Japanese MNEs’ ownership choices. Using data for Japanese investments in China between 1991 and 2013, we construct a latent growth-curve model to provide empirical evidence for the proposed institutional response model.
previous article Is “Yin-Yang balancing” superior to ambidexterity as an approach to paradox management?
next article How powerful political ties appropriate resources and how weaker organizations protect themselves: A case study from Indonesia

Dont have a licence yet? Then find out more about our products and how to get one now:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

  • über 102.000 Bücher
  • über 537 Zeitschriften

aus folgenden Fachgebieten:

  • Automobil + Motoren
  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Elektrotechnik + Elektronik
  • Energie + Nachhaltigkeit
  • Finance + Banking
  • Management + Führung
  • Marketing + Vertrieb
  • Maschinenbau + Werkstoffe
  • Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

inform now

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

  • über 67.000 Bücher
  • über 340 Zeitschriften

aus folgenden Fachgebieten:

  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Finance + Banking
  • Management + Führung
  • Marketing + Vertrieb
  • Versicherung + Risiko




Jetzt Wissensvorsprung sichern!

inform now
Footnotes
1
The differences in regulatory rules between natural resource related industries and other industries are synthesized from the website of the Ministry of Commerce of the People’s Republic of China (www.​mofcom.​gov.​cn).
 
Literature
Acquaah, M. 2007. Managerial social capital, strategic orientation, and organizational performance in an emerging economy. Strategic Management Journal, 28(12): 1235–1255.
Aiken, L. S., & West, S. G. 1991. Multiple regression: Testing and interpreting interactions. London: Sage.
Anderson, E., & Gatignon, H. 1986. Modes of foreign entry: A transaction cost analysis and propositions. Journal of International Business Studies, 17(3): 1–26.
Andersson, U., Forsgren, M., & Holm, U. 2002. The strategic impact of external networks: Subsidiary performance and competence development in the multinational corporation. Strategic Management Journal, 23(11): 979–996.
Arnold, D. J., & Quelch, J. A. 1998. New strategies in emerging markets. Sloan Management Review, 40(1): 7–20.
Barney, J. 1991. Firm resources and sustained competitive advantage. Journal of Management, 17(1): 99–120.
Beamish, P. W. 1993. The characteristics of joint ventures in the People’s Republic of China. Journal of International Marketing, 1(2): 29–48.
Beamish, P. W., & Inkpen, A. C. 1998. Japanese firms and the decline of the Japanese expatriate. Journal of World Business, 33(1): 35–50.
Boisot, M., & Child, J. 1996. From fiefs to clans and network capitalism: Explaining China’s emerging economic order. Administrative Science Quarterly, 41(4): 600–628.
Brouthers, K. D., Brouthers, L. E., & Wilkinson, T. J. 1995. Strategic alliances: Choose your partners. Long Range Planning, 28(3): 2–25.
Brouthers, L. E., Gao, Y., & Napshin, S. 2014. Keiretsu centrality—Profits and profit stability: A power dependence perspective. Journal of Business Research, 67(12): 2603–2610.
Buiter, W., & Rahbari, E. 2011. Global growth generators: Moving beyond emerging markets and BRICs. CEPR Policy Insight paper no. 55: April, CEPR and Citigroup.
Cantwell, J., Dunning, J. H., & Lundan, S. M. 2010. An evolutionary approach to understanding international business activity: The co-evolution of MNEs and the institutional environment. Journal of International Business Studies, 41(4): 567–586.
Cavusgil, S. T., Knight, G., & Riesenberger, J. 2014. International business: The new realities, 3rd ed. Essex: Pearson.
Chan, C. M., Makino, S., & Isobe, T. 2010. Does subnational region matter? Foreign affiliate performance in the United States and China. Strategic Management Journal, 31(11): 1226–1243.
Chang, S.-J., Chung, J., & Moon, J. J. 2013. When do wholly owned subsidiaries perform better than joint ventures?. Strategic Management Journal, 34(3): 317–337.
Child, J., & Tse, D. K. 2001. China's transition and its implications for international business. Journal of International Business Studies, 32(1): 5–21.
Chung, C., Lu, J., & Beamish, P. 2008. Multinational networks during times of economic crisis versus stability. Management International Review, 48(3): 279–296.
Contractor, F. J. 1990. Ownership patterns of US joint ventures abroad and the liberalization of foreign government regulations in the 1980s: Evidence from the benchmark surveys. Journal of International Business Studies, 21(1): 55–73.
Davis, P. S., Desai, A. B., & Francis, J. D. 2000. Mode of international entry: An isomorphism perspective. Journal of International Business Studies, 31(2): 239–258.
Delios, A., & Beamish, P. W. 1999. Ownership strategy of Japanese firms: Transactional, institutional, and experience influences. Strategic Management Journal, 20(10): 915–933.
Delios, A., & Beamish, P. W. 2001. Survival and profitability: The roles of experience and intangible assets in foreign subsidiary performance. Academy of Management Journal, 44(5): 1028–1038.
Delios, A., & Beamish, P. W. 2004. Joint venture performance revisited: Japanese foreign subsidiaries worldwide. Management International Review, 44(1): 69–91.
Delios, A., Beamish, P. W., & Lu, J. W. 2010. Business groups, international business: An Asia Pacific perspective, 2nd ed.: 235–258. Singapore: Pearson.
Delios, A., & Henisz, W. J. 2000. Japanese firms’ investment strategies in emerging economies. Academy of Management Journal, 43(3): 305–323.
Demirbag, M., Glaister, K. W., & Tatoglu, E. 2007. Institutional and transaction cost influences on MNEs' ownership strategies of their affiliates: Evidence from an emerging market. Journal of World Business, 42(4): 418–434.
Dhanaraj, C., & Beamish, P. W. 2004. Effect of equity ownership on the survival of international joint ventures. Strategic Management Journal, 25(3): 295–305.
Doz, Y. L. 1996. The evolution of cooperation in strategic alliances: Initial conditions or learning processes?. Strategic Management Journal, 17(S1): 55–83.
Erramilli, M. K. 1996. Nationality and subsidiary ownership patterns in multinational corporations. Journal of International Business Studies, 27(2): 225–248.
Fan, G., & Wang, X. 2001. NERI index of marketization of China by province (2000). Beijing: Economic Science Press.
Figueira-de-Lemos, F., Johanson, J., & Vahlne, J.-E. 2011. Risk management in the internationalization process of the firm: A note on the Uppsala model. Journal of World Business, 46(2): 143–153.
Gao, G. Y., Murray, J. Y., Kotabe, M., & Lu, J. 2010. A “strategy tripod” perspective on export behaviors: Evidence from domestic and foreign firms based in an emerging economy. Journal of International Business Studies, 41(3): 377–396.
Gatignon, H., & Anderson, E. 1988. The multinational corporation’s degree of control over foreign subsidiaries: An empirical test of a transaction cost explanation. Journal of Law, Economics, & Organization, 4(2): 305–336.
Gaur, A. S., Delios, A., & Singh, K. 2007. Institutional environments, staffing strategies, and subsidiary performance. Journal of Management, 33(4): 611–636.
Gaur, A. S., & Lu, J. W. 2007. Ownership strategies and survival of foreign subsidiaries: Impacts of institutional distance and experience. Journal of Management, 33(1): 84–110.
Goerzen, A., Asmussen, C. G., & Nielsen, B. B. 2013. Global cities and multinational enterprise location strategy. Journal of International Business Studies, 44(5): 427–450.
Gomes-Casseres, B. 1990. Firm ownership preferences and host government restrictions: An integrated approach. Journal of International Business Studies, 21(1): 1–22.
Gong, Y. 2003. Subsidiary staffing in multinational enterprises: Agency, resources, and performance. Academy of Management Journal, 46(6): 728–739.
Gong, Y., Shenkar, O., Luo, Y., & Nyaw, M.-K. 2007. Do multiple parents help or hinder international joint venture performance? The mediating roles of contract completeness and partner cooperation. Strategic Management Journal, 28(10): 1021–1034.
Grabowiecki, J. 2006. Keiretsu groups: Their role in the Japanese economy and a reference point (or a paradigm) for other countries. Visiting Research Fellow Monograph Series. Chiba: Institute of Developing Economies, Japan External Trade Organization.
Hennart, J.-F. 1991. The transaction costs theory of joint ventures: An empirical study of Japanese subsidiaries in the United States. Management Science, 37(4): 483–497.
Hennart, J.-F., & Larimo, J. 1998. The impact of culture on the strategy of multinational enterprises: Does national origin affect ownership decisions?. Journal of International Business Studies, 29(3): 515–538.
Hitt, M. A., Dacin, M. T., Levitas, E., Arregle, J.-L., & Borza, A. 2000. Partner selection in emerging and developed market contexts: Resource-based and organizational learning perspectives. Academy of Management Journal, 43(3): 449–467.
Hofstede, G. 1980. Culture’s consequences: International differences in work related values. London: Sage.
Hoskisson, R. E., Eden, L., Lau, C. M., & Wright, M. 2000. Strategy in emerging economies. Academy of Management Journal, 43(3): 249–267.
Inkpen, A. C., & Beamish, P. W. 1997. Knowledge, bargaining power, and the instability of international joint ventures. Academy of Management Review, 22(1): 177–202.
Johanson, J., & Vahlne, J.-E. 1977. The internationalization process of the firm – A model of knowledge development and increasing foreign market commitments. Journal of International Business Studies, 8(1): 23–32.
Johanson, J., & Vahlne, J.-E. 2009. The Uppsala internationalization process model revisited: From liability of foreignness to liability of outsidership. Journal of International Business Studies, 40(9): 1411–1431.
Jung, J. C., Beamish, P. W., & Goerzen, A. 2008. FDI ownership strategy: A Japanese-US MNE comparison. Management International Review, 48(5): 491–524.
Jung, J. C., Beamish, P. W., & Goerzen, A. 2010. Dynamics of experience, environment and MNE ownership strategy. Management International Review, 50(3): 267–296.
Khanna, T., & Palepu, K. 1997. Why focused strategies may be wrong for emerging markets. Harvard Business Review, 75(4): 41–51.
Khanna, T., Palepu, K. G., & Sinha, J. 2005. Strategies that fit emerging markets. Harvard Business Review, 83(6): 63–76.
Knight, F. 1921. Risk, uncertaity, and profit. Boston and New York: Houghton Mifflin.
Kostova, T. 1999. Transnational transfer of strategic organizational practices: A contextual perspective. Academy of Management Review, 24(2): 308–324.
Kostova, T., & Zaheer, S. 1999. Organizational legitimacy under conditions of complexity: The case of the multinational enterprise. Academy of Management Review, 24(1): 64–81.
Kriauciunas, A., & Kale, P. 2006. The impact of socialist imprinting and search on resource change: A study of firms in lithuania. Strategic Management Journal, 27(7): 659–679.
Lau, L. J., Qian, Y., & Roland, G. 2000. Reform without losers: An interpretation of China’s dual-track approach to transition. Journal of Political Economy, 108(1): 120–143.
Li, J. 1995. Foreign entry and survival: Effects of strategic choices on performance in international markets. Strategic Management Journal, 16(5): 333–351.
Li, J., & Li, Y. 2010. Flexibility versus commitment: MNEs’ ownership strategy in China. Journal of International Business Studies, 41(9): 1550–1571.
Li, J. J., Zhou, K. Z., & Shao, A. T. 2009. Competitive position, managerial ties, and profitability of foreign firms in China: An interactive perspective. Journal of International Business Studies, 40(2): 339–352.
Li, P.-Y., & Meyer, K. E. 2009. Contextualizing experience effects in international business: A study of ownership strategies. Journal of World Business, 44(4): 370–382.
Lin, Y.-M. 2001. Between politics and markets: Firms, competition, and institutional change in post-Mao China. Cambridge: Cambridge University Press.
Luo, Y. 1998. Joint venture success in China: How should we select a good partner?. Journal of World Business, 33(2): 145–166.
Luo, Y. 2003. Market-seeking MNEs in an emerging market: How parent-subsidiary links shape overseas success. Journal of International Business Studies, 34(3): 290–309.
Luo, Y. 2005. How important are shared perceptions of procedural justice in cooperative alliances?. Academy of Management Journal, 48(4): 695–709.
Ma, X., Tong, T. W., & Fitza, M. 2013. How much does subnational region matter to foreign subsidiary performance? Evidence from Fortune Global 500 Corporations’ investment in China. Journal of International Business Studies, 44(1): 66–87.
Mahlich, J. C. 2010. Patents and performance in the Japanese pharmaceutical industry: An institution-based view. Asia Pacific Journal of Management, 27(1): 99–113.
Mair, J., Mart, I., & Ventresca, M. J. 2012. Building inclusive markets in rural Bangladesh: How intermediaries work institutional voids. Academy of Management Journal, 55(4): 819–850.
Makino, S., & Beamish, P. W. 1998a. Local ownership restrictions, entry mode choice, and FDI performance: Japanese overseas subsidiaries in Asia. Asia Pacific Journal of Management, 15(2): 119–136.
Makino, S., & Beamish, P. W. 1998b. Performance and survival of joint ventures with non-conventional ownership structures. Journal of International Business Studies, 29(4): 797–818.
Makino, S., Beamish, P. W., & Zhao, N. B. 2004. The characteristics and performance of Japanese FDI in less developed and developed countries. Journal of World Business, 39(4): 377–392.
Makino, S., & Delios, A. 1996. Local knowledge transfer and performance: Implications for alliance formation in Asia. Journal of International Business Studies, 27(5): 905–927.
Makino, S., & Neupert, K. E. 2000. National culture, transaction costs, and the choice between joint venture and wholly owned subsidiary. Journal of International Business Studies, 31(4): 705–713.
McGahan, A. M., & Porter, M. E. 1997. How much does industry matter, really?. Strategic Management Journal, 18(Summer SI): 15–30.
McGuire, J., & Dow, S. 2002. The Japanese keiretsu system: An empirical analysis. Journal of Business Research, 55(1): 33–40.
McGuire, J., & Dow, S. 2009. Japanese keiretsu: Past, present, future. Asia Pacific Journal of Management, 26(2): 333–351.
Meyer, K. E., & Nguyen, H. V. 2005. Foreign investment strategies and sub-national institutions in emerging markets: Evidence from Vietnam. Journal of Management Studies, 42(1): 63–93.
Meyer, K. E., & Peng, M. W. 2016. Theoretical foundations of emerging economy business research. Journal of International Business Studies, 47(1): 3–22.
Mjoen, H., & Tallman, S. 1997. Control and performance in international joint ventures. Organization Science, 8(3): 257–274.
Neter, J. W., & Michael, H. K. 1990. Applied linear statistical models. Boston: Irwin.
Newman, K. L. 2000. Organizational transformation during institutional upheaval. Academy of Management Review, 25(3): 602–619.
North, D. C. 1990. Institutions, institutional change and economic performance. Cambridge: Cambridge University.
Opdenakker, M.-C., & Van Damme, J. 2000. The importance of identifying levels in multilevel analysis: An illustration of the effects of ignoring the top or intermediate levels in school effectiveness research. School Effectiveness and School Improvement, 11(1): 103–130.
Padmanabhan, P., & Cho, K. R. 1996. Ownership strategy for a foreign affiliate: An empirical investigation of Japanese firms. Management International Review, 36(1): 45.
Park, S. H., Li, S., & Tse, D. K. 2006. Market liberalization and firm performance during China’s economic transition. Journal of International Business Studies, 37(1): 127–147.
Park, S. H., & Luo, Y. 2001. Guanxi and organizational dynamics: Organizational networking in Chinese firms. Strategic Management Journal, 22(5): 455–477.
Park, S. H., & Ungson, G. R. 2001. Interfirm rivalry and managerial complexity: A conceptual framework of alliance failure. Organization Science, 12(1): 37–53.
Peng, M. W. 2003. Institutional transitions and strategic choices. Academy of Management Review, 28(2): 275–296.
Peng, M. W., Ahlstrom, D., Carraher, S. M., & Shi, W. 2017. An institution-based view of global IPR history. Journal of International Business Studies, 48: 893–907.
Peng, M. W., & Heath, P. S. 1996. The growth of the firm in planned economies in transition: Institutions, organizations, and strategic choice. Academy of Management Review, 21(2): 492–528.
Peng, M. W., & Luo, Y. 2000. Managerial ties and firm performance in a transition economy: The nature of a micro-macro link. Academy of Management Journal, 43(3): 486–501.
Peng, M. W., & Pleggenkuhle-Miles, E. G. 2009. Current debates in global strategy. International Journal of Management Reviews, 11(1): 51–68.
Peng, M. W., Sun, S. L., Pinkham, B., & Chen, H. 2009. The institution-based view as a third leg for a strategy tripod. Academy of Management Perspectives, 23(3): 63–81.
Peng, M. W., Wang, D. Y. L., & Jiang, Y. 2008. An institution-based view of international business strategy: A focus on emerging economies. Journal of International Business Studies, 39(5): 920–936.
Powell, W. W., & DiMaggio, P. J. 1991. The new institutionalism in organizational studies. Chicago: University of Chicago Press.
Puck, J. F., Holtbrügge, D., Mohr, A. T., Lee, S.-H., & Makhija, M. 2009. Beyond entry mode choice: Explaining the conversion of joint ventures into wholly owned subsidiaries in the People’s Republic of China. Journal of International Business Studies, 40(3): 388–404.
Puffer, S. M., & McCarthy, D. J. 2011. Two decades of Russian business and management research: An institutional theory perspective. Academy of Management Perspectives, 25(2): 21–36.
Qian, G., Li, L., Li, J., & Qian, Z. 2008. Regional diversification and firm performance. Journal of International Business Studies, 39(2): 197–214.
Rabe-Hesketh, S., & Skrondal, A. 2012. Multilevel and longitudinal modeling using Stata. College Station: StataCorp.
Roland, G. 2002. The political economy of transition. Journal of Economic Perspectives, 16(1): 29–50.
Roth, K., & Morrison, A. J. 1992. Implementing global strategy: Characteristics of global subsidiary mandates. Journal of International Business Studies, 23(4): 715–735.
Scott, W. R. 2014. Institutions and organizations. Thousand Oaks: Sage.
Shetty, Y. K. 1979. Managing the multinational corporation: European and American styles. Management International Review, 19(3): 39–48.
Shi, W., Markóczy, L., & Stan, C. V. 2014. The continuing importance of political ties in China. Academy of Management Perspectives, 28(1): 57–75.
Shi, W., Sun, S. L., & Peng, M. W. 2012. Sub-national institutional contingencies, network positions, and IJV partner selection. Journal of Management Studies, 49(7): 1221–1245.
Shi, W., Sun, S. L., Pinkham, B. C., & Peng, M. W. 2014. Domestic alliance network to attract foreign partners: Evidence from international joint ventures in China. Journal of International Business Studies, 45(3): 338–362.
Singer, J. D., & Willett, J. B. 2003. Applied longitudinal data analysis: Modeling change and event occurrence. Oxford: Oxford University Press.
Stopford, J. M., & Wells, L. T. 1972. Managing the multinational enterprise: Organization of the firm and ownership of the subsidiaries. New York: Basic Books.
Tan, J., & Tan, D. 2005. Environment–strategy co-evolution and co-alignment: A staged model of Chinese SOEs under transition. Strategic Management Journal, 26(2): 141–157.
Thomas, L. G., III, & Waring, G. 1999. Competing capitalisms: Capital investment in American, German, and Japanese firms. Strategic Management Journal, 20(8): 729–748.
Wilkinson, T. J., Peng, G. Z., Brouthers, L. E., & Beamish, P. W. 2008. The diminishing effect of cultural distance on subsidiary control. Journal of International Management, 14(2): 93–107.
Williamson, O. E. 1985. The economic institutions of capitalism. New York: Free Press.
Woodcock, C. P., Beamish, P. W., & Makino, S. 1994. Ownership-based entry mode strategies and international performance. Journal of International Business Studies, 25(2): 253–273.
Wright, M., Filatotchev, I., Hoskisson, R. E., & Peng, M. W. 2005. Strategy research in emerging economies: Challenging the conventional wisdom. Journal of Management Studies, 42(1): 1–33.
Xia, J., Tan, J., & Tan, D. 2008. Mimetic entry and bandwagon effect: The rise and decline of international equity joint venture in China. Strategic Management Journal, 29(2): 195–217.
Xiong, Y. 2009. Chinese opening: Changing game models between the Western and Chinese enterprises [中国流:改变中外企业博弈的格局]. Beijing: Tsinghua University Press.
Yamakawa, Y., Peng, M. W., & Deeds, D. L. 2008. What drives new ventures to internationalize from emerging to developed economies?. Entrepreneurship: Theory & Practice, 32(1): 59–82.
Yang, X., Jiang, Y., Kang, R., & Ke, Y. 2009. A comparative analysis of the internationalization of Chinese and Japanese firms. Asia Pacific Journal of Management, 26(1): 141–162.
Ye, H. 2012. MNC flexibility and post-entry mode change: The role of learning ownership regulations through network embeddedness. International Business & Economics Research Journal, 11(8): 871–880.
Zhao, H., Luo, Y., & Suh, T. 2004. Transaction cost determinants and ownership-based entry mode choice: A meta-analytical review. Journal of International Business Studies, 35(6): 524–544.
Metadata
Title
An institutional response model to economic liberalization: Japanese MNEs’ ownership choices in China
Authors
Megan Min Zhang
Paul W. Beamish
Publication date
21-12-2017
Publisher
Springer US
Published in
Asia Pacific Journal of Management / Issue 1/2019
Print ISSN: 0217-4561
Electronic ISSN: 1572-9958
DOI
https://doi.org/10.1007/s10490-017-9549-5

Other articles of this Issue 1/2019

Asia Pacific Journal of Management 1/2019 Go to the issue

OriginalPaper

How powerful political ties appropriate resources and how weaker organizations protect themselves: A case study from Indonesia

OriginalPaper

Economic crisis, intra-MNC production shifts and MNC performance from a network perspective

Commentary

Is “Yin-Yang balancing” superior to ambidexterity as an approach to paradox management?

OriginalPaper

Service employees’ concurrent adaptive and unethical behaviors in complex or non-routine tasks: The effects of customer control and self-monitoring personality

OriginalPaper

Unrelated acquisitions in China: The role of political ownership and political connections

OriginalPaper

Risk adaptation and emotion differentiation: An experimental study of dynamic decision-making