When, How, and with what Success? The Joint Effect of Entry Timing and Entry Mode on Survival of Japanese Subsidiaries in China

Abstract

This study examines the question whether joint ventures or wholly owned subsidiaries are more likely to survive in the context of Japanese subsidiaries in China. The author suggests that the answer to this question depends on the time the subsidiary was established. Specifically, it is argued that joint ventures founded during the early stage of institutional reforms are more likely to survive than wholly owned subsidiaries set up at that time, and vice versa for subsidiaries established in the late phase of institutional reforms. The rationale for these propositions is that at the beginning of market-oriented reforms, contributions provided by local partners make shared ownership an optimal entry mode strategy, whereas a relatively stable regulatory framework in the late stage of institutional reforms enables the firm to realize benefits associated with sole ownership more efficiently. Empirical evidence supports both propositions.