Why TNCs try to make their subsidiaries sole proprietorship enterprises in China? —An analysis of TNCs’ strategy on equity ownership structure

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.

Keywords

Transnational Corporations (TNCs), sole proprietorship in joint ventures, strategy on equity ownership structure