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Title: Equity sharing arrangements and joint venture operation in the People's Republic of China
Authors: Pan, Yigang
Vanhonacker, Wilfried R.
Keywords: Equity sharing
Joint ventures
Issue Date: Feb-1994
Series/Report no.: Marketing Working Paper Series ; MKTG 94.025
Abstract: What is an appropriate equity sharing arrangement for international joint ventures is an important but puzzling issue. The current literature does not seem to provide a consistent answer to this question. In this paper, we propose that a minority equity position for foreign businesses is a viable equity sharing arrangement for joint ventures located in developing countries. Our proposition seemed to be supported by an empirical study based on field interviews of seventy-three international joint ventures in the People's Republic of China. The findings suggest that joint ventures with a minority foreign equity seemed to operate more smoothly than joint ventures with a 50%-50% equity sharing or a majority foreign equity sharing arrangements. Further, the popularity of a minority foreign equity holding was found in a separate data set of 3957 joint ventures in China covering thirteen years from 1979 to 1991.
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