MNC Flexibility And Post-Entry Mode Change: The Role Of Learning Ownership Regulations Through Network Embeddedness

Abstract

This paper proposed a theoretical framework that has linked together network embeddedness, learning ownership regulations, MNC flexibility, and post-entry mode change. Network embeddedness refers to the MNC subsidiarys relations with and reliance on the networks for learning ownership regulations. Learning ownership regulations refers to acquiring, interpreting or confirming ownership regulations of foreign investment in China. MNC flexibility is defined in this paper as the MNCs (Multinational Corporations) ability to manage the risks and exploit the opportunities that arise from changing ownership regulations of foreign investment in China. Post-entry mode change is specified as the MNC subsidiary in China has been changed to wholly foreign-owned enterprise after initial entry as joint venture, including Chinese-foreign Cooperative Enterprise, Chinese-foreign JV and International JV. Japanese subsidiaries in China were studied, specifically three wholly foreign-owned enterprises in Shanghai. The case studies showed that network embeddedness contributes to learning ownership regulations, which in turn promotes MNC flexibility, which in turn facilitates post-entry mode change. In addition, MNC flexibility promoted by learning ownership regulations through network embeddedness can facilitate not only the change from joint venture to wholly foreign-owned enterprise, but also keeping as joint venture.