Open AccessMNEs’ Ownership Structure under Uncertainty: Explanations from TCE and Real Options Logic
Author(s) -
Kyeungrae Oh
Publication year - 2017
Publication title -
international journal of business and management
Language(s) - English
Resource type - Journals
eISSN - 1833-8119
pISSN - 1833-3850
DOI - 10.5539/ijbm.v12n2p67
Subject(s) - corporate governance , language change , subsidiary , explanatory power , business , joint venture , power (physics) , industrial organization , economic system , economics , multinational corporation , finance , commerce , art , philosophy , physics , literature , epistemology , quantum mechanics
How does an MNE choose its ownership structure when it enters into transition nations where the level of corruption is largely high? This paper examines how uncertainty stemming from corruption affects an MNE’s choice of governance forms using the data of 463 MNEs in 24 transition countries. Drawing on two theoretical perspectives such as TCE and real options logic, this study proposes two sets of competing hypotheses regarding firms’ selection of ownership structure. Results show that TCE predictions have a better explanatory power on the choice of governance forms over those of real options logic as a whole. In particular, this study finds that an MNE is more likely to adopt wholly owned subsidiaries in highly arbitrary environment of corruption whereas they intend to cope with a joint venture form of governance under highly pervasive corruption environment. Consistently, an MNE which has more familiar with corruption tends to adopt a joint venture form of governance.