Joint venture success

JOINT imagines between house servant companies in developing countries and foreign companies waste become a popular means for both managements to avenge their objectives. They offer, at least in principle, an opportunity for each quisling to benefit significantly from the comparative advantages of the other. Local partners bring acquaintance of the domestic market; familiarity with government bureaucracies and regulations; understanding of local projection markets; and, possibly, existing manufacturing facilities. Foreign partners can offer advanced accomplish and product technologies, management know-how, and access to export markets. For either side, the opening move of joining with another company in the new venture lowers capital requirements relative to going it alone.

As attractive as union ventures might seem, however, they frequently perform unsatisfactorily and be relatively runny. This seems to be true even when the partners ar two companies from the corresponding industrial country; international knock ventures seem to be more vulnerable still. In a study of the last mentioned (Killing, 1982), for example, 36 percent were rated by participants as having performed poorly--a high isotropy indeed. An obvious set of questions therefore arises: If international joint ventures are established to exploit the complementary features of each partner, why are the partners frequently disapointed with their joint performance? What problems cause them to be unstable? Can these problems be alleviated to improve these ventures prospects for success?



On behalf of the International Finance Corporation (IFC), we surveyed joint ventures between domestic companies in developing countries and foreign companies based in industrial countries to try to understand the difficulties that arise in negotiations leading up to a joint venture agreement and those that arise during the ventures implementation and operation. About 75 joint ventures in 6 countries were include in the study.

Negotiating agreements

The managers we contacted expressed mixed feelings about the formal joint venture agreement,

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