The concept of the joint venture was developed in the United States. First, we need to make
a distinction between purely contractual, non-equity joint ventures, on the one hand, and
equity or corporate joint ventures, on the other.
The regular form of joint venture is a company that is founded out of equity provided from
two other entities. This venture is similar to a business partnership but limited to a specific
project or purpose.
The equity joint venture manifests the founding firms‟ willingness to
cooperate by providing each a certain percentage of the common capital stock as illustrated
in the graphic below (in this case with each partner providing half of the capital stock).There
are countless ways to build up an equity joint venture with each partner providing only a
certain percentage of the common capital stock (e.g. 70/30%, 90/10%, 51/49% and so
forth). The firms gain control over the founded joint venture and share revenues, expenses
and assets in equal proportion to their respective contributions to the venture‟s registered
capital. Differing arrangements are possible.
Over the last decade, we were able to witness rapidly growing companies, some of them
seeking for partnerships to take advantage of positive synergy effects to gain in size or to
enter new foreign markets. The topic of this essay should be why firms seek to venture,
what the benefits of venturing are and why some firms fail after the venture, what are
the downsides of this concept?
Contents
Intro - What is a joint venture?
Why do firms venture?
Entering foreign markets
Reasons to venture become competitive advantages - the benefits
Problems and common reasons to fail - the perils
Designing ventures that work
Conclusion
References
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