The Relative Performance of Joint Ventures and Wholly-Owned Subsidiaries and the Reasons why they exit: the Case of Dutch Foreign Subsidiaries

Master's Thesis , 2009 , 60 Pages , Grade: 2

Business economics - Company formation, Business Plans

Using data on more than 200 foreign entries made by Dutch MNEs between 1995 and 2003, this study examines the relative performance of jointly-owned and wholly-owned affiliates and sheds light on the underlying reasons why these two types of affiliates exit. By employing performance measures such as average longevity and exit rate, and by differentiating between exits through liquidations and those through sell-offs, I find that there are no essential performance differences between WOSs and JVs, which is in line with the results of prior scholarship (e.g. Dang, 1977; Chowdhury, 1992; Chan, 1995; Mata & Portugal, 2000; Pangarkar & Lim; 2003; Delios & Beamish, 2004). Furthermore, the findings reveal that both WOSs and JVs mainly exit voluntarily. The most prevalent reason for WOS exit is strategic restructuring, whereas the most common reason for JV exit is fierce competition in the host market. Finally, I discover supporting evidence for the proposition that MNE parents are more likely to buy out local partners from JVs over which they have majority ownership than from JVs over which they have minority ownership.

Inhaltsverzeichnis (Table of Contents)

• 1. Introduction
• 2. Literature Review
  • 2.1 Introduction
  • 2.2 Advantages and Disadvantages of WOSS and JVs
    • 2.2.1 Advantages of WOSs
    • 2.2.2 Disadvantages of WOSs
    • 2.2.3 Advantages of JVs
    • 2.2.4 Disadvantages of JVs
  • 2.3 Theoretical Arguments and Empirical Findings concerning WOS and JV Performance
    • 2.3.1 Introduction
    • 2.3.2 JVs outperform WOSs
    • 2.3.3 WOSs outperform JVs
    • 2.3.4 WOSs and JVs perform equally well
    • 2.3.5 Summary
  • 2.4 Reasons for the Exit of Foreign Subsidiaries
    • 2.4.1 Introduction
    • 2.4.2 Forced Exits
    • 2.4.3 Voluntary Exits
    • 2.4.4 Summary
• 3. Propositions
  • 3.1 Introduction
  • 3.2 Average Longevity and Exit Rate
  • 3.3 Exits through Sell-offs and Exits through Liquidations
  • 3.4 Reasons for Exits
  • 3.5 Changes in Ownership Structure
• 4. Methodology
  • 4.1 Introduction
  • 4.2 Original Sample
  • 4.3 Data Collection and Final Sample
  • 4.4 Performance Measures used to test Propositions 1a through 2b
  • 4.5 Testing Propositions 3a, 3b, and 4
• 5. Results
  • 5.1 Introduction
  • 5.2 Average Longevity and Exit Rate
  • 5.3 Exits through Sell-offs and Exits through Liquidations
  • 5.4 Reasons for Exits
  • 5.5 Changes in Ownership Structure

Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)

This thesis aims to analyze the relative performance of joint ventures (JVs) and wholly-owned subsidiaries (WOSs) and investigate the reasons behind their exit from foreign markets, focusing specifically on Dutch foreign subsidiaries. The study examines existing literature on the topic, develops propositions, and tests these propositions using empirical data.

• Relative performance of JVs and WOSs
• Reasons for exit of foreign subsidiaries (forced vs. voluntary)
• Methods of exit (sell-offs vs. liquidations)
• Impact of ownership structure changes
• Empirical analysis of Dutch foreign subsidiaries

Zusammenfassung der Kapitel (Chapter Summaries)

Chapter 1 introduces the research topic and outlines the thesis's structure. Chapter 2 reviews existing literature on the advantages and disadvantages of JVs and WOSs, exploring theoretical arguments and empirical findings related to their relative performance and reasons for exit. Chapter 3 presents the propositions that will be tested in the study. Chapter 4 details the methodology used, including data collection and sample selection. Chapter 5 presents the results of the empirical analysis, examining average longevity, exit rates, exit methods, and reasons for exit.

Schlüsselwörter (Keywords)

Joint ventures, wholly-owned subsidiaries, foreign direct investment, performance, exit, Dutch multinational enterprises, ownership structure, sell-offs, liquidations.

Frequently Asked Questions

What is the main focus of this study on Dutch foreign subsidiaries?

The study examines the relative performance of jointly-owned (JVs) and wholly-owned affiliates (WOSs) and the reasons why they exit foreign markets.

Is there a significant performance difference between JVs and WOSs?

Based on data from 1995 to 2003, the research found no essential performance differences between wholly-owned subsidiaries and joint ventures in terms of longevity or exit rates.

What are the most common reasons for a wholly-owned subsidiary to exit?

Strategic restructuring is identified as the most prevalent reason for the exit of wholly-owned subsidiaries (WOSs).

What causes joint ventures to exit foreign markets?

The most common reason for JV exit is fierce competition in the host market.

Do these exits happen voluntarily or by force?

The findings reveal that both wholly-owned subsidiaries and joint ventures mainly exit foreign markets voluntarily.

How does ownership majority affect partner buy-outs?

MNE parents are more likely to buy out local partners from JVs where they already hold a majority ownership compared to those where they have a minority stake.

• College: University of Amsterdam
• Grade: 2
• Author: Matthias Otto (Author)
• Publication Year: 2009
• Pages: 60
• Catalog Number: V186730
• ISBN (eBook): 9783869435213
• ISBN (Book): 9783869433912
• Language: English
• Tags: relative, performance, joint, ventures, wholly-owned, subsidiaries, reasons, case, dutch, foreign