Ownership Advantages and Firm Factors Influencing Performance of Foreign Affiliates in Japan

Abstract

This empirical study explores the impact of knowledge development factors, parent firm-specific and subsidiary characteristics on foreign affiliated performance. First, we examine the ownership and performance (based on return on asset, return on sales and profitability) of foreign affiliated in Japan. Second, we extend the subsidiary’s factors with parent company’s firm factors in order to analyze the performance and ownership advantages based on wholly owned subsidiary (WOS) and international joint venture (IJV). Third, we explore the relationship between firm factors and foreign ownership ratio.Our finding suggested that first, when a subsidiary operates in the manufacturing industry; MNCs prefer to have a majority of equity ownership.Second, the factors of industry, foreign employees and size of parent firm and subsidiary, demonstrate a statistically significant on performance. Finally, our findings indicate that foreign ownership ratio has a positive relationship with knowledge transfer factors, import and export ratio of foreign affiliates.