Joint
ventures
Definition
:
Two or more firms
contribute tangible and intangible resources
by pooling a portion of their assets within
a common legal organization in order to further
a common goal.
Payments
:
- Share of profits
- Rights to share of output
- No payments ; indirect benefits
Advantages & Disadvantages
:
| Advantages |
Disadvantages |
| Allows
fast access to complementary resources
and capabilities |
Vagueness
of objectives |
| Allows
fast access to market |
Definition
of failure |
| Reduces
costs of entry |
Management
authoritiy issues |
| Allows
access to internal capital market |
Information
may leak |
| Establishes
market power |
May create
a new competitor |
| Promotes
organizational learning |
Unstable
; potential conflict between partners |
| Lowers
risk |
Give up
the profit potential |
May be
perseived as a less agressive mode of
entry |
Give up
opportunity to establish your firm in
an emerging market |
The position of the partners is
not symmetrical. The JV may for example constitute
a vertical investment for one party and a diversification
for the other.
Source :
Strategic Management, Raphael
Amit, Professor at Wharton University of Pennsylvania, US
(c) ECOFINE.COM, Bernard Jaquier, Professor in Economics and Finance, Switzerland, 2018
