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Why TNCs try to make their subsidiaries sole proprietorship enterprises in China? —An analysis of TNCs’ strategy on equity ownership structure |
| LI Wei′an1, LI Baoquan2 |
| 1.Business School, Nankai University, Tianjin 300071, China; 2.Industrial and Commercial Bank of China (ICBC), Beijing 100032, China |
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Abstract A review on the evolution of the Transnational Corporations’ (TNCs) equity ownership structure in their subsidiaries in recent 20 years reveals an increasingly clear preference for sole proprietorship. Based on results of the prior researches, this paper presented a two-stage evolutionary model to explain the underlying reasons of the tendency in China. It is shown that the TNCs’ strategic choice for their subsidiaries equity ownership structure is a decision-making process and result, which makes the parent company, as the principal part, based on the current business strategies of the parent company (local or global integration) at the premise of the investment environment of host country, pursue possibly unproductive receipts by choosing or changing the structure of the equity ownership.
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Issue Date: 05 September 2007
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