Wholly-owned Subsidiary Research Articles

Bowl America Inc.

AbstractSporting &Recreational (MIC: 13.5 SIC: 7933 NAIC:713950)Bowl America, through its wholly‐owned subsidiaries, operates bowling centers. Co. operates in the greater metropolitan area of Washington, D.C., the greater metropolitan area of Baltimore, MD, Orlando, FL, the greater metropolitan area of Jacksonville, FL, and the greater metropolitan area of Richmond, VA. These establishments are fully air‐conditioned with facilities for service of food and beverages, game rooms, rental lockers, and playroom facilities. All centers provide shoes for rental, and bowling balls are provided free. In addition, each center retails bowling accessories. Most locations are equipped for glow‐in‐the‐dark bowling, popular for parties and non‐league bowling.

Cullen/Frost Bankers, Inc.

AbstractCommercial Banking (MIC: 8.1 SIC: 6029 NAIC:522110)Cullen/Frost Bankers is a financial holding company offering a broad range of banking and financial services to retail and commercial customers throughout Texas. As of Dec 31 2003, Co. operated 79 financial centers in Texas through its wholly‐owned subsidiary, The Frost National Bank. In addition to general commercial banking, Co.'s other product and services include trust and investment management, investment banking, insurance brokerage, leasing, asset‐based lending, treasury management and item processing. As of Dec 31 2003, Co. had consolidated total assets of $9.67 billion and total deposits of $8.07 billion.

MBIA Inc.

AbstractInsurance (MIC: 8.2 SIC: 6351 NAIC:524130)MBIA is engaged in providing financial guarantee insurance, investment management services and municipal and other services to public finance clients and structured finance clients on a global basis. Financial guarantee insurance provides an unconditional and irrevocable guarantee of the payment of the principal of, and interest or other amounts owing on, insured obligations when due. Co. conducts its financial guarantee business through its wholly‐owned subsidiary, MBIA Insurance Corporation. Co. also owns MBIA Assurance S.A., a French insurance company, which writes financial guarantee insurance in the member countries of the European Union.

National Security Group, Inc

AbstractInsurance (MIC: 8.2 SIC: 6311 NAIC:524113)National Security Group is an insurance holding company that, through its subsidiaries, writes primarily dwelling fire and windstorm, homeowners, mobile homeowners, and personal non‐standard automobile lines of insurance. Co., through its life insurance subsidiary, offers a basic line of life, and health and accident insurance products. Property‐casualty insurance is Co.'s most significant segment. Co.'s property‐casualty insurance is conducted through National Security Fire & Casualty Company, a wholly‐owned subsidiary of Co., and Omega One Insurance Company, a wholly‐owned subsidiary of National Security Fire & Casualty Company.

FirstMerit Corp

AbstractCommercial Banking (MIC: 8.1 SIC: 6022 NAIC:522110)FirstMerit is a multi‐bank holding company with $10.47 billion in assets as of Dec 31 2003. Co., through its affiliates, operates principally as a regional banking organization, providing banking, fiduciary, financial, insurance and investment services to corporate, institutional and individual customers throughout northeastern and Central Ohio and Western Pennsylvania counties. FirstMerit Bank, Co.'s largest subsidiary, is the parent company of 16 wholly‐owned subsidiaries. At Dec 31 2003, FirstMerit Bank operated 158 full‐service banking offices in 24 Ohio and western Pennsylvania counties.

Australian Divestiture Activity: An Examination of Gains to Sell-Off Announcements

This study examines the source of gains associated with Australian divestiture activity, defined as a voluntary modification of the firm's productive assets by a sell-off of a complete operating division or wholly-owned subsidiary of the divesting firm The sell-off announcement produces positive average abnormal returns of 1.15% over the two-day announcement period. We conclude that the gains arise predominantly from divestitures that have a strategic focus as demonstrated by, first, the divested unit is unrelated to the firm's core activities (a strategic divestiture), second, the significance of the strategic variable in explaining the positive market reaction in regression analysis, and third, the finding of more significant results where the intended use of proceeds of the sell-off is for strategic purposes.

Commercial Net Lease Realty, Inc.

AbstractProperty, Real Estate &Development (MIC: 8.3 SIC: 6798 NAIC:525930)Commercial Net Lease Realty is a fully integrated, self‐administered real estate investment trust. Co. and its wholly‐owned subsidiaries acquire, own, manage and indirectly, through investment interests, develop primarily single‐tenant retail, office and industrial properties that are generally leased under long‐term commercial net leases. As of Dec 31 2003, Co. owned 339 properties in 39 states that are generally leased to major retail businesses under long‐term commercial net leases. These businesses include Academy, Barnes & Noble, Bennigan's, Best Buy, Borders, Eckerd, Jared Jewelers, OfficeMax, The Sports Authority and the United States of America.

Parent‐Affilate Agency Conflicts and Foreign Entry Mode Choice

We theoretically identify two levels of agency conflicts related to foreign direct investment (FDI): within a parent firm and between parent(s) and an affiliated firm. For a sample of 182 firms that announced U.S.‐related FDIs in 1995, we examine the effects of agency conflicts on the choice between a wholly owned subsidiary (WOS) and a joint venture (JV), and the relative share ownership of a parent. Firms with higher management ownership, especially the firms that made related FDIs, and firms with higher foreign affiliate monitoring efficiency are more likely to choose a WOS. Differences between U.S. and non‐U.S. parents are also examined.

Practice papers personal financial services in a digital age

AbstractCo‐operative Bank Financial Advisers Ltd (CBFA) is a wholly‐owned subsidiary of the Co‐operative Bank plc. Established since 1972, it specialises in the provision of independent financial advice to personal and corporate customers across the financial services spectrum. Based in Stockport in the north‐west of the UK, CBFA conducts its business via a nationally‐based team of independent financial advisers (IFA), offering a bespoke service to customers at a mutually agreed time and location—usually bank premises, business premises or in the client's own home.In the late 1990s, CBFA faced a crisis. A number of marketplace challenges threatened the long‐term viability of its business. In this paper, one of the management team members describes how her organisation used its understanding of customer decision‐making—backed by good customer research—to regain its footing in a difficult and competitive marketplace. Copyright © 2003 Henry Stewart Publications.

The Characteristics and Performance of Affiliates of Small and Medium-Size Multinational Enterprises in an Emerging Market

Little has been reported on the characteristics and performance of affiliates of small and medium-sized multinational enterprises (MNEs) operating in emerging markets. The paper has two research objectives: to assess characteristics of Korean affiliates of small and medium-sized MNEs, and identify the determinants of performance. Seven hypotheses were formulated and tested on a sample of Korean subsidiaries of small and medium-sized MNEs by using a bootstrap method of regression analysis. We found that: affiliates of small and medium-sized MNEs in Korea favored joint ventures with local firms rather than wholly-owned subsidiaries; ownership rate was directly related to the degree of control from the parent firm; and performance was determined significantly by the degree of control exercised by parent firms and their exporting levels. Age, size, and R&D expenditures had no relationship with the performance of affiliates of small and medium-size MNEs in Korea.

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The Choice Between Joint Venture and Wholly Owned Subsidiary: An Institutional Perspective

The study of foreign entry-mode choice has been based almost exclusively on transaction-cost theory. This theory focuses mainly on the impacts of firm- and industry-specific factors on the choice of entry mode, taking the effects of country-specific contextual factors as constant or less important. In contrast, the institutional perspective emphasizes the importance of the influence of both institutional forces embedded in national environments and decision makers' cognitive constraints on the founding conditions of new ventures. Still, this theoretical perspective has yet to provide insights into how institutional factors influence the choice of foreign entry mode. The primary goal of the present study is to provide a unifying theoretical framework to examine this relationship. We synthesize transaction-cost and institutional perspectives to analyze a sample of 364 Japanese overseas subsidiaries. Our results support the notion that institutional theory provides incremental explanatory power of foreign entry-mode choice in addition to transaction-cost theory. In particular, we found that multinational enterprises tend to conform to the regulative settings of the host-country environment, the normative pressures imposed by the local people, and the cognitive mindsets as bounded by counterparts' and multinational enterprises' own entry patterns when making foreign entry-mode choices.

Characterising Japanese Direct Investment in Central and Eastern Europe: A Firm Level Investigation of Stylised Facts and Investment Characteristics

This article analyses the activities of Japanese investors in Central and Eastern Europe since the beginning of the region's transition. The use of firm level data on Japanese foreign direct investment (FDI) in the region allows us to focus on the industry, location and timing of affiliate establishment at a level of detail previously unexamined. This enables us to compare Japanese investment with overall regional inward investment as well as investigate country specialisation patterns within the region. We also characterise the type of investing parent, and determine how investments in CEE fit into the European-wide investment patterns for these firms. Finally, we investigate the entry mode choices of investing firms, finding a shift from minority-owned joint ventures and limited participation in the region in favour of wholly-owned subsidiaries and larger involvement in the region.

Table of Contents

AbstractIRS Contemplating Corporate Responsibility, Other Form 990 ChangesIRS Reverses Course on Treatment of Income Received by Cooperative's Wholly Owned SubsidiaryIRS Employees Immune from Personal Liability for Tax‐Exempt Organization AuditPrivilege Protects IRS Documents Concerning Denial of Tax‐Exempt Status from DisclosureIRS Rulings Denying Tax‐Exempt Status Not DisclosableCourt Upholds and Voids Portions of Political Campaign Disclosure LegislationNew York Times and the Law of Charitable Assistance for Victims of TerrorismMemo to IRS: Please Consider Revision of Form Letter

Trade, Foreign Direct Investment, and International Technology Transfer: A Survey

The author surveys the literature on trade and foreign direct investment--especially wholly-owned subsidiaries of multinational firms and international joint ventures--as channels for technology transfer. He also discusses licensing and other arm's length channels of technology transfer. He concludes: 1) How trade encourages growth depends on whether knowledge spillover is national or international. Spillover is more likely to be national for developing countries than for industrial countries. 2) Local policy often makes pure foreign direct investment infeasible, so foreign firms choose licensing or joint ventures. The jury is still out on whether licensing or joint ventures lead to more learning by local firms. 3) Policies designed to attract foreign direct investment are proliferating. Several plant-level studies have failed to find positive spillover from foreign direct investment to firms competing directly with subsidiaries of multinationals. (However, these studies treat foreign direct investment as exogenous and assume spillover to be horizontal-when it may be vertical.) All such studies do find the subsidiaries of multinationals to be more productive than domestic firms, so foreign direct investment does result in host countries using resources more effectively. 4) Absorptive capacity in the host country is essential for getting significant benefits from foreign direct investment. Without adequate human capital or investments in research and development, spillover fails to materialize. 5) A country's policy on protection of intellectual property rights affects the type of industry it attracts. Firms for which such rights are crucial (such as pharmaceutical firms) are unlikely to invest directly in countries where such protections are weak, or will not invest in manufacturing and research and development activities. Policy on intellectual property rights also influences whether technology transfer comes through licensing, joint ventures, or the establishment of wholly-owned subsidiaries.

Japanese Investors' Choice of Joint Ventures Versus Wholly-owned Subsidiaries in the US: The Role of Market Barriers and Firm Capabilities

This study analyzes how market barriers and firm capabilities affect multinationals' choice of joint ventures versus wholly-owned subsidiaries abroad. In the study, we compile a vector of variables that distinguish between industry-specific barriers and firm-specific capabilities to analyze Japanese investors' ownership decisions in the US. Our results in general support the hypothesis that Japanese investors facing high market barriers in the target industry are more likely to choose joint ventures, while those possessing strong competitive capabilities are more likely to set up wholly-owned subsidiaries. Specifically, marketing variables are more influential than technological factors in determining the choice of partial versus full ownership. These findings, however, vary across sub samples that represent low- versus high-tech industries and consumer versus industrial products.

National Culture, Transaction Costs, and the Choice Between Joint Venture and Wholly Owned Subsidiary

Transaction cost theory posits that culture plays a limited role in the choice between JV and WOS. In contrast, research suggests that firms’ preferred level of ownership in their foreign subsidiaries is influenced primarily by cultural traits. This study provides additional evidence in this ongoing debate by replicating Hennart's transaction cost model of entry mode choice in two different national contexts: Japanese firms investing in the U.S. and the U.S. firms investing in Japan. The results suggest that the transaction cost explanation for the ownership choice holds in the both national contexts. Yet, the propensity to choose JV or WOS significantly varied between Japanese and the U.S. firms.

The Development and Impact of Marketing Capabilities in Central Europe

The industrial organisation and evolutionary economics traditions in international business and the resource-based view of the firm in strategic management provide a rich and related set of perspectives on the question of performance in an international environment. This paper draws on these perspectives to examine the nature of marketing capabilities across a range of firm types in Hungary, Poland and Slovenia. A number of key strategic capabilities are examined including market orientation, the time horizon of strategic decision making and positioning capability. The study finds that firms with foreign participation have been able to develop a sophisticated level of marketing capability with a resulting positive impact on financial and market performance. Wholly-owned subsidiaries and international joint ventures emerge as equally effective mechanisms for the transfer of marketing capability. Conclusions are drawn and implications from the research are outlined.

HRM in Western Subsidiaries in Russia and Poland

This study analyzes the Human Resource Management (HRM) practices in joint ventures and wholly-owned subsidiaries of Western MNCs located in Russia and Poland. Different hypotheses are developed, testing whether or not MNCs are more likely to implement standardized practices in Poland and Russia. The effects on HRM practices of MNC equity share, non-financial resources provided by MNCs to the focal unit, and mode of establishment of the foreign unit are also investigated. Implications for future research and managers are discussed.

Expatriate staffing in foreign subsidiaries of Japanese multinational corporations in the PRC and the United States

This study examines expatriate staffing in foreign wholly-owned subsidiaries and joint ventures of Japanese firms located in the People's Republic of China and the United States. Expatriates are conceptualized as performing two primary functions. The first is a control function in which the expatriate works to align the operations of the subsidiary with that of the Japanese parent. The second function is a knowledge role. In this role, either the expatriate acts to transfer the Japanese parent's knowledge to the subsidiary or the expatriate is an agent for the acquisition of host-country knowledge. We tested for these two functions using subsidiary-level data on Japanese firms' operations in China and the US. Our results indicate that the control function was more prominent in joint ventures in China than in the US. The results also indicate that expatriates played a more significant knowledge-transfer function role in technology and marketing-intensive industries in China than in the US. A lack of MNC experience in China was found to be associated with limited use of expatriates. Finally, expatriate employment was negatively related to the number of subsidiaries of the parent company worldwide.