A Research On The Choice Behaviors Of Equity Ownership Of Multinational Enterprises'Entry Into Foreign Markets

Beginning from the later 1990s, Wholly Foreign-Owned Enterprises(WFOEs)have continued to surpass Equity Joint Ventures(EJVs)in terms of popularity, contractual FDI and actually used FDI. At the same time, many multinational enterprises'(MNEs)subsidiaries in China are increasing in their equity ownership in the incumbent EJVs. As a result, WFOE has become the leading choice of MNEs(or FDI)now. Consequently, the paper tries to do research on the choice behaviors of ownership of MNEs. First of all, based on summarization of important literatures, I propose the analytical method that mixes dual perspectives, three dimensions and four important theories. Secondly, a dynamic model about equity ownership preference of MNEs is set up, and some fundamental conclusions derived from the model are presented. Thirdly, grounded on decomposition and theoretical analysis of every parameter of the model, a framework with three level, including enterprise, industry and country is established. Finally, in terms of this framework, the paper does an empirical research on the choice behaviors of MNEs in China, and sums up the key elements inducing above behaviors. The main conclusions are as follows: with the deregulation of MNEs'entry mode, as for new comer , the choice of establishing WFOEs mainly depends on the strategies and specific-assets(eg. technology)of MNEs; while for the foreign partner in established joint venture, the behavior of holding more equity ownership lies in the experience in foreign markets and strategies of MNEs. From the perspective of all subsidiaries, MNEs will make compound choices between WFOEs and EJVs when considering their desirable entry and operation mode, thus WFOEs or EJVs will still satisfy different needs of MNEs.