EQUITY OWNERSHIP PATTERNS AND IMPACT ON OPERATIONS: EVIDENCE FROM U.S. FIRMS IN CHINA

This study examines how variations in equity ownership among U.S. firms in China translate into actual organizational practices and experiences. Four levels of equity ownership-minority, equal, majority, and wholly foreign owned-are tested against three sets of variables-finance. government relations, and human resource management. There is no clear-cut advantage for one level of equity ownership over another. On some issues, wholly owned firms appear to enjoy certain freedoms and advantages while on other issues, there are benefits to being a minority or equal partner, or a majority owner in a joint venture. Majority and wholly owned ventures are able to introduce distinct human resource practices in their Chinese operations but are less likely to develop good relationships with the Chinese government and bureaucracy. Joint ventures are more likely to exhibit patterns typical of Chinese enterprises and less able to resist meddling by government authorities. Consequently, firms contemplating entry into China would have to examine their own unique circumstances and industry specific factors to determine whether they should form a minority, equal, majority or wholly owned enterprise.