Empirical Study on the performance of International Corporate Merger, takeover, divestiture, joint venture and wholly owned subsidiaries

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We test the hypothesis that location factors have strong predictive power for mode of establishment and ownership choice of MNEs, by controlling for parent experience and capabilities in a sample of 751 manufacturing subsidiaries of 405 Japanese MNEs. In European countries, we find that host competitiveness, host culture type, and industrial growth are the most appropriate location predictors for entry mode. We create a profile of joint ventures, full acquisition and wholly owned greenfield modes and reveal how different strategic context interact with the location to determine the MNE expansion approach.International joint ventures (IJV) enable foreign firms to complement their lack of local knowledge and resources by accessing their local partners' knowledge and resource bases. This paper proposes that foreign firms can increase the legitimacy of their IJVs to facilitate local market penetration by building interorganizational linkages through which third parties and, especially, prospective customers in local market can infer the viability and competence of IJVs. Our empirical analyses of manufacturing IJVs in Japan support our arguments.Previous empirical researches on Japanese subsidiaries have found that wholly owned subsidiaries outperform joint venture based on conventional ownership classification of IJV. This paper examines entry mode based on non-conventional forms of JV, and the impact of ownership and internalization advantages on Japanese subsidiaries' performance in Brazil. The findings suggest that the Japanese-Japanese JV with a partner that has previous experience accumulated in the local market performed better than WOS and the traditional IJV.