Ownership Choice Research Articles

Optimal Ownership and Firm Performance: An Analysis of China's FDI Liberalization

Abstract Seminal theories of the firm posit that firm ownership is allocated to minimize contractual inefficiencies. Yet, it remains unclear how much the optimal ownership choice affects firm performance in practice. This paper provides a first quantification of the gains from optimal ownership within multinational firms, by exploiting a major liberalization of China's policy restrictions on foreign ownership. The liberalization allowed previously restricted firms to become fully foreign owned. We find that these reoptimized ownership choices raise firm output by 40% and productivity by 7.5% on average. An extended property-rights theory of the multinational firm rationalizes these effects and their heterogeneity.

The role of cities in cross-border mergers and acquisitions — Evidence from China

This study explores the impact of an international friendship city, serving as diplomatic relations between cities, on the transaction time and equity ownership choice in cross-border mergers and acquisitions (CBMAs). Analyzing data from Chinese firms spanning the period 2001 to 2019, we discover a positive and significant correlation between the establishment of an international friendship city and shorter CBMAs duration and higher CBMAs share of equity. Further evidence suggests that the effect is more pronounced (a) in target countries that keep cooperative partnerships with China, (b) countries along the Belt and Road, and (c) state-owned enterprises (SOEs) acquirers. In addition, we identify effects at the provincial level, demonstrating a correlation between the number of international friendship cities and positive outcomes. Mechanism tests show that the subnational-level friendship relationship consolidates cultural exchange and lessens institutional barriers, thereby reducing the completion time and raising the ownership of acquirers. Drawing on political perspective, our results provide new insights into the important role of friendly diplomatic relations to cross-border investment for enterprises internationalization.

Comparing and contrasting choice model and machine learning techniques in the context of vehicle ownership decisions

In recent years, planners have started considering Machine Learning (ML) techniques as an alternative to discrete choice models (CM). ML techniques are primarily data-driven and typically achieve better prediction accuracy compared to CM. However, it is hypothesized that since the ML techniques do not have the strong grounding to economic theory as the CMs, they may not perform well in contexts that are radically different from the ‘training’ scenario. It is also hypothesized that the relative prediction performance may be affected by the metrics used for comparing the models. This research aims to test these two hypotheses empirically by modelling vehicle ownership choices using household survey data from Dhaka, Bangladesh collected in 2004, 2010 and 2019. The performances of CM (multinomial logit) and ML techniques (neural networks and gradient boosting trees) have been compared using log-likelihood and mean absolute percentage error of market shares. The results indicate that the multinomial logit model (MNL) with a piecewise linear transformation of the household income, has the best performance in terms of log-likelihood and mean absolute percentage error of market shares. This is followed by Neural Networks (NN) and Gradient Boosting Trees (GBT). The results thus provide empirical evidence that the ML techniques do not consistently outperform CM. Moreover, the difference in the performance of the models further increases if the prediction scenario is substantially different. This reinforces the hypothesis that CMs, with their behavioural underpinning, are better suited for long-term forecasting than data-driven ML approaches, especially if the population and network attributes are expected to change substantially. These findings will be useful for planners and policy makers in the selection of the appropriate tool for forecasting travel demand.

Investigating the endogenous social interaction effects on the choice of owning a bicycle by the university students in Toronto

The paper employed a latent segmentation discrete choice model with endogenous social interaction effects to investigate the role of gender and age-cohort-specific peer influences on the choice of owning a bicycle by university students in Toronto. The empirical investigation used a dataset collected through a survey of students on seven campuses of four universities in Toronto. Two latent segments of bicycle owners are identified: peer-conformable and peer-indifferent. The empirical model proves that the influence of social interactions is real and very strong on bicycle ownership choices. The influence of fellow female students’ choices on an individual female student is stronger than the influence of the choices of fellow male students on an individual male student in Toronto. Moreover, considerable heterogeneity exists in such effects. Policy initiatives that target female students of specific age groups will have great potential in influencing bicycle ownership.

Family firms, productivity and input specificity: An empirical assessment of Italian firms’ sourcing

ABSTRACT This paper provides an empirical assessment of Italian firms’ sourcing. Combining the international economics literature on global sourcing with the family business and international business literature on family firms (FFs)’ internationalization, we build a comprehensive framework in which sourcing is shaped by location (domestic versus foreign sourcing) and ownership (integration versus outsourcing) decisions. Relying on a new firm-level, cross-sectional dataset on a stratified sample of Italian manufacturing firms, we address the relationship between sourcing and various firm-level features. Our probit and multinomial probit estimates highlight family presence in ownership and control, total factor productivity and reliance on specific inputs as the main drivers of sourcing. While playing little role in shaping the ownership decision, both FF status and total factor productivity affect location choices, fostering domestic and foreign sourcing, respectively. Conversely, reliance on specific inputs is key in orienting the ownership decision, promoting integration over outsourcing. Our study contributes to the international economics literature on global sourcing by studying factors other than productivity and input specificity that affect input procurement; moreover, it contributes to the family business and international business literature on FFs’ internationalization by taking a supply-side perspective and investigating sourcing through the interplay between location and ownership choices.

Risky Reputations: The Role of CSI in Cross-Border Acquisitions

This study examines the influence of reputation risk on ownership choice in cross-border acquisitions (CBAs). Building on internalization theory and the reputation literature, we argue that acquirers with higher reputation risk through involvement in corporate social irresponsibility (CSI) obtain lower levels of ownership in foreign targets, as CSI implies damage to their firm- specific advantages (FSAs). We suggest that in a cross-border context acquirers obtain lower levels of ownership to take advantage of the target firm’s legitimacy in the host market and reduce the likelihood of regulatory scrutiny and stakeholder resistance. However, the negative effects of acquirer reputation risk on the level of ownership in CBAs are contingent on characteristics of the target firm’s country. We find support for our hypotheses in a sample of 17,362 CBAs by 11,136 unique acquirers from 84 countries of target firms located in 67 countries.

The interplay between home and host institutions on CBA ownership decision

AbstractCross‐border acquisitions (CBAs) are one of the key strategies for internationalization. However, most of what is known about CBA strategies relies on the effects of the host country's environment or the home country's conditions. In this article, we analyze the interplay between these two important factors. We show that companies from less institutionally developed countries are more influenced by poor institutional conditions found in host countries. We analyzed a dataset of 1,390 cross‐border acquisitions performed by Latin American firms. The literature on the subject points out that less developed host environments lead to fewer shares of ownership acquired in CBAs. However, we confirmed that the quality of the home country's institutional environment positively moderates the effects of the host environment over ownership choice in the acquisition. This effect is due to companies from less developed environments being able to use their embedded capabilities to better navigate faulty institutional environments abroad.

Effects of trip-level characteristics on autonomous vehicle ownership: A U.S. analysis

We examined how trip-level characteristics may influence autonomous vehicle ownership decisions. Using 639 stated preference survey responses in the US, we developed an integrated choice and latent variable model linking trip- and consumer-level characteristics to AV ownership choices. Results suggested parking cost, travel cost and travel time are important predictors for vehicle ownership at the trip-level; and monthly payment, car ownership importance and autonomous vehicle safety perceptions are significant predictors at the consumer-level. By examining elasticities of vehicle ownership market shares, we found while consumer-level characteristics have the most prominent effect on vehicle ownership decisions, trip-level characteristics have a small but measurable effect. Among trip-level characteristics, parking cost has the largest impact on vehicle ownership decisions, followed by travel cost of ridehailing (both conventional and autonomous), and transit travel time. Finally, we simulated future vehicle ownership decisions under three policy scenarios by leveraging trip- and consumer-level characteristics.

Formal institution deficiencies and informal institution substitution: MNC foreign ownership choice in emerging economy

This study suggests that multinational corporations (MNCs) use foreign ownership choice as a strategic response to formal institutional deficiencies in emerging economy. We argue that although MNCs choose lower ownership level in foreign subsidiaries when economic and political institutional deficiencies are high, informal institutions can substitute for deficient formal institutions. A longitudinal analysis of 9,377 foreign entries in China shows that social institutions serve as substitutes for deficient economic institutions but not for deficient political institutions in shaping foreign ownership choice; and the substitutive effect of social institutions is especially important for foreign subsidiaries with lower levels of slack resources or do not have SOEs as the local partner.

ADOPTION WITHOUT TEARS: APPRAISAL OF THE LEGAL REQUIREMENTS IN NIGERIA AND OTHER JURISDICTIONS

The successes of most African marriages are largely predicated on child bearing. The discovery of childlessness in marriage often comes with psychological and physical torture, sometimes resulting in self-blame and seeking possible options, one of which is adoption. Adoption is a unique mode of establishing a family relationship between a person and a child of a known or unknown parentage with a view to making such a child legally that of the adopting parent. Adoption allows persons to legally assume the role of parenthood over a child that is not biologically borne by them. The reason for which a person may wish to adopt could range from infertility to need to get a particular sex or provide companionship for an only child, to stabilize a childless marriage, or to provide care for children who have been abandoned or rejected, or to ‘replace’ a dead child. Adoption is not just about picking any child of one’s choice and claiming of ownership. This paper focuses on an appraisal of the necessary procedures to comply with when adopting a child, whether to reside within or outside Nigerian jurisdiction. The doctrinal method of research such as textbooks, journal articles, case laws, internet materials etc. were used to carry out this research. Findings revealed that there are lots of legal gymnastics or hurdles involved which may be difficult to successfully navigate without professional help including the challenge of taking the child outside Nigeria. Therefore, it is recommended that there should be established legal frameworks that promote comprehensive child adoption laws that harmonize internal and international instruments, to back implementation of these laws with needed enforcement procedure.

Examination of the role of safety concerns from autonomous vehicle ownership choice: results of a stated choice experiment in Istanbul, Turkey

ABSTRACT As the widespread usage of autonomous vehicles is closer to becoming a reality, substantial consideration should be paid to the extent to which individuals choose vehicular mobility tools. The purpose of this study is to examine vehicle ownership models to better understand the adoption of vehicles by considering some factors such as liability issues, cost, safety, and environmental characteristics. 323 respondents were recruited from Istanbul, Turkey to complete the stated choice experiment through a web-based survey. Multinomial logit and Heteroskedastic mixed logit models were estimated to unravel users’ preferences concerning the selection of autonomous vehicles with distinction among private, shared, and ride-hailing vehicles. Results indicate that the adoption of those vehicles varied concerning the aforementioned characteristics, and these findings could help decision-makers to develop a vehicular mobility system for future transportation dynamics.

Does the ownership of utilities matter for social outcomes? A survey of the evidence for developing countries

ABSTRACT This paper surveys the evidence on the relevance of the ownership choice for electricity and water and sanitation utilities with respect to access and affordability in developing countries. It shows that most of the widely quoted evidence is outdated and fails to reflect the long-term effects of choices made in the 1990s. The most recent data suggests that ownership affects social outcomes less than regulatory governance and market structure. The evidence is however not precise enough yet. More research is needed to determine how context and institutional constraints, including regulatory capacity, should influence ownership choices.

Out of the Comfort Zone! Family Leaders’ Subsidiary Ownership Choices and the Role of Vulnerabilities

Based on the socioemotional wealth approach and a sample of 3,904 subsidiary ownership choices made by 586 family firms, this study shows that family-managed firms (i.e., those family firms with a family member in a leadership position) prefer wholly owned subsidies over joint ventures when entering foreign markets. Family-managed firms are also more likely to revise their subsidiary ownership choices and form joint ventures when in vulnerability conditions, that is, when they experience performance below aspirations and when entering a culturally distant market.

An Econometric Analysis of Maize Farmer’s Choice of Land Ownership Systems: Evidence Using Panel Data from Tanzania

Abstract This paper determines the socioeconomic and physical characteristics that influence maize farmer’s choice of land ownership systems in Tanzania, i.e., owned, sharecropped, and rented title land. The paper uses the Tanzania National Panel Survey (TZNPS) data basing on 2,073 observations comprising of a sample size of 691 households in three consecutive waves 2008/2009, 2010/2011, and 2012/2013. Using a t-test for mean comparison, the paper found that there is a significant difference between male and female-headed households across socioeconomic and physical factors determining the choice of land ownership systems among maize smallholder farmers. Moreover, the paper findings revealed that 90 percent, 7 percent, and 3 percent of the sampled maize smallholder farmers chose to farm under-owned, shared, and rented title land system respectively. Furthermore, the econometric analysis which is grounded from the multinomial logit regression model showed that accessibility, farm size, quantity harvested, accessibility of extension services, gender, household size, and age are all pertinent in influencing the smallholder maize farmer’s choice of land ownership. The paper recommends that these characteristics of the smallholder maize producers should be critically considered when formulating any land and agricultural policies to enhance proper decision making by smallholder farmers on the choice of land ownership system that may led to sustainable agricultural production, productivity, and food security in developing countries particularly in Tanzania.

The Role of FDI Motives in the Link between Institutional Distance and Subsidiary Ownership Choice by Emerging Market Multinational Enterprises

AbstractThis study advances the limited generalizability of previous studies that have focused on developed market multinational enterprises and explores the link between institutional distance and ownership choice of emerging market multinational enterprises (EMNEs). Such studies in the EMNE context have been rare, and we provide key theoretical explanations for EMNEs’ distinct foreign direct investment motives to act as important contingencies in the link between institutional distance and EMNEs’ ownership choices. Analyses of longitudinal data of Chinese firms’ internationalization from 2001 to 2017 reveal that the higher the institutional distance, the lower the level of EMNE subsidiary ownership control with market‐seeking motives; while the higher the institutional distance, the higher the level of EMNE subsidiary ownership control with knowledge‐seeking motives.

Friends or Foes? Bilateral Relationships and Ownership Choice in Cross‐border Acquisitions by Emerging Market Firms

AbstractEmerging market firms (EMFs) are increasingly recognized as a heterogeneous group of business enterprises, providing a unique context for examining the predictive power of existing theories. Drawing on real options and internalization theories, this paper predicts the contrasting effect of bilateral relationships on EMFs' ownership choice in cross‐border acquisitions. The conflicting conjectures are tested using data consisting of almost 1,000 cross‐border acquisition deals. Our results show that weak economic, political and military relationships between acquiring and target countries induce EMFs to opt for full acquisitions. The findings support the view of internalization theory, highlighting that EMFs prefer full ownership over partial ownership by coping with the political risk derived from weak bilateral relationships.

Contingent Signaling Effects of Anti-Mafia Interventions of MNEs’ Acquisitions in Italy (2000-2015)

Extant research on cross-border acquisitions argues that foreign firms’ ownership choices reflect signals about the quality of local institutions, in a way that a ‘positive’ signal is typically associated with a higher likelihood of majority ownership. In this paper, we challenge the common assumption that foreign firms univocally interpret such signals as positive or negative. We propose that MNEs may interpret the same signals differently depending on the consistency between the signal and the recipients’ mental models about the underlying phenomena. We test these conjectures in the context of government-sponsored institutional actions against mafia operations in Italy, using a dataset comprising 3,924 foreign acquisition deals in Italy in the period 2000 – 2015. Our findings indicate that MNEs’ ownership level increases as a response to anti- mafia institutional actions only when the acquirer is rooted in contexts (sectors or countries) that make the signal salient. Adopting a signaling theory perspective, our results contribute to international business research by placing a unique emphasis on signal interpretation. We also bring a more nuanced understanding of how the continued rise of organized crime as an important economic actor presents a grand challenge to a rule-based society.

Does improving public transport decrease car ownership? Evidence from a residential sorting model for the Copenhagen metropolitan area

Car ownership is lower in urban areas, where public transport is of high quality. This suggests that better public transport offers the possibility to relieve the many problems (congestion, pollution, and parking) associated with the presence of cars in urban areas. To investigate this issue, we develop a model for the simultaneous choice of residential location and car ownership by households, and estimate it on Danish data, paying special attention to accessibility of the metro network. We use the estimated model to simulate the impact of an extension of the metro network. We show that for the Greater Copenhagen Area an extension of the metro network decreases car ownership by 2–3%, while the average compensating variation is approximately 3% of household income.

Unaware of Being Unaware and Financial Non-Participation

Unawareness of the existence of financial products is a significant reason for non-participation in financial products and services in emerging economies. We propose a theoretical framework where households can acquire awareness, thereby enabling them to make an informed choice of whether to own a particular financial product. Using India's national benchmark survey for financial literacy and inclusion, we examine the awareness levels and ownership for 28 different financial products. We find that households with weaker demographic characteristics possess low levels of awareness of financial products. Performing a thought experiment that treats unaware households with awareness, we predict their ownership choices. Interestingly, although the probability distribution of the financial participation of the aware households stochastically dominates that of the unaware households, there is a sizeable cross-section of unaware households who might own products if they were to be made aware of the existence of the products. The empirical design allows policy makers to undertake targeted awareness programs to increase the uptake of financial products and services.

Home relocation and mobility tool ownership: Econometric investigations in the context of rising fuel prices in the Greater Toronto Area

Using stated preference data collected in the Greater Toronto Area (GTA), this study presents a combined choice model that considers alternatives consisting of bundles of home relocation and mobility tool choices. The model is estimated for changes in housing and mobility tool ownership choices in response to increasing commuting costs. The major finding is that there is a strong inertia against home relocation, despite significant increases in transportation costs. Using household home location choice data (choice in response to increasing transportation costs), this study also presents a model which predicts whether households will move closer to their workplaces or farther away as a function of several variables, including home prices, household characteristics and commuting distances. The findings reveal that most households relocate farther away from the workplace. Income and housing unaffordability are contemplated as the cause of rigidity in home relocation in the GTA.