Wholly Owned Subsidiary

The Relative Performance of Joint Ventures and Wholly-Owned Subsidiaries and the Reasons why they exit: The Case of Dutch Foreign SubsidiariesA wholly owned subsidiary offers three advantages. 

First, when a company’s competitive advantage is based on its technological superiority, a wholly owned subsidiary makes sense, since it reduces the company’s risk of losing control over this critical aspect. For this reason, many high-tech companies prefer wholly owned subsidiaries to joint ventures or licensing arrangements.

Second, a wholly owned subsidiary gives a company the kind of tight control over operations required for global coordination to take profits from one country to support competitive strategy in another.

Finally, a wholly owned subsidiary may be the best choice if a company has to realise location advantages and experience-curve effects. The entry of a number of South Korean companies such as LG, Samsung, Hyundai into India by setting up subsidiaries without a local partner are examples of wholly owned subsidiaries.