Performance implications of sino-foreign joint ventures vs. wholly foreign owned enterprises in Chinese pharmaceutical industry

The Economy of China went through a revolutionary change when it entered into the World Trade Organization in 2001, reducing the barriers on FDI and making the infrastructure more favourable for Wholly Foreign Owned Enterprises (WFOE) due to which majority of the foreign firms which existed as Joint Ventures converted to Wholly Foreign Owned Enterprises (WFOE) while many remained as Joint Ventures. China has the second largest pharmaceutical market in the world and this research is done to understand whether foreign pharmaceutical companies in China perform better as WFOE or Joint Venture. We review established theories including Transaction Cost Economics, Eclectic Paradigm, Resource Based View and the Institutional Theory which explain the operation mode choice for foreign companies in China focusing our attention on the choice between Joint Ventures and Wholly Foreign Owned Enterprises. In light of these theories we analyze the financial performance of Joint Ventures and WFOE using extensive Oriana & Orbis database of Bureau Van Dijk and conduct an empirical analysis using ANOVA statistics to determine whether significant differences exist between the two groups. Our results indicate significant differences do exists between the financial performances while it also indicates that Sino-Foreign Joint Ventures perform considerably better than WFOE in the Chinese pharmaceutical industry.

L’economia della Cina si addentrò in un cambiamento rivoluzionario quando nel 2001 entrò nella World Trade Organization, riducendo le barrier su FDI e creando infrastrutture migliori per WFOE che hanno portato la maggioranza delle imprese che esistevano come Joint Venture a convertirsi in WFOE mentre molte rimasero come Join Venture. La Cina ha il secondo più grande mercato farmaceutico del mondo e questa ricerca è stata fatta per capire se le imprese farmaceutiche straniere in Cina hanno performance migliori come WFOE o come JV. Rivediamo teorie conclamate che includono TCE, EP, RBV and IT che spiegano la modalità di scelta dell’operazione per le compagnie straniere in Cina focalizzando la nostra attenzione sulla scelta tra la performance finanziaria della JV e della WFOE utilizzando un esteso database dall’Oriana database del BVD e conducendo un’empirica analisi utilizzando statistiche ANOVA per determinare importanti differenze che esistono tra i due gruppi. I nostri risultati indicano che Sino Foreign Joint Ventures rende considerevolmente meglio che WFOE nell’industria farmaceutica cinese.