International Journal of Industrial Organization 19 (2001) 319–343 www.elsevier.com / locate / econbase A theory of joint venture life-cycles Indrani Roy Chowdhury a , Prabal Roy Chowdhury b , * b a Jadavpur University, Jadavpur, India CSDILE, School of International Studies ( SIS), Jawaharlal Nehru University ( JNU), New Delhi, 110067, India Received 1 May 1998; received in revised form 1 February 1999; accepted 1 May 1999 Abstract In this paper we provide a dynamic theory of joint venture life cycle that relies on synergy, organisational learning and moral hazard. We demonstrate that depending on parameter values the outcome may involve any one of the following: stable joint venture formation, joint venture formation followed …show more content…
2 See Beamish (1985) and Gomes-Casseres (1987) for surveys of prior research on joint venture stability. 3 See Bhandari (1996–97), Business India (1992) and Ghosh (1996) for a description of these and other cases. 4 See, among others, Dymsza (1988), Miller et al. (1996) and Tomlinson (1970). Tomlinson (1970), for example, studies British joint ventures in India and Pakistan. He finds that one of the main reasons behind such ventures is the local resource supplied by the domestic partner. I. Roy Chowdhury, P. Roy Chowdhury / Int. J. Ind. Organ. 19 (2001) 319 – 343 321 theory.5 In order to keep things simple we assume that learning is both sided and symmetric. Thus, after learning occurs, the MNC can supply labour more cheaply than before, while the domestic firm can supply capital more cheaply. The final ingredient of our theory is moral hazard. We assume that input levels are non-verifiable and hence cannot be contracted upon. Thus, if a joint venture forms, then the partner firms cannot write a contract over the quantities of the inputs to be supplied. Hence both the firms have an incentive to free ride on the other, leading to a coordination cost for the joint venture. This is analytically crucial since, in the absence of any such costs, a joint venture always forms.6 We consider a dynamic two period model consisting of two firms, an MNC and a domestic firm. In every
Company has evolved to handle joint ventures, but not all of them turn into successes.
Attracting foreign capital (Indian government encouraged foreign investment) for new ventures. Foreign investors feel more comfortable working with a reputable party. Appendix 7 provides evidence of this (e.g. ventures with IBM, AT&T, Bell Canada).
Joint ventures (JV) are a popular method of foreign market entry because they theoretically provide a way to join complementary skills and know-how, as well as a way for the foreign firm to gain an insider’s perspective on the foreign market. Since China began its market opening in 1978, joint ventures have been the most commonly used form of foreign direct investment (FDI), with about 70% of FDI in China in the 1980s and 1990s taking the form of joint ventures (Qui, 2005, p. 47). The Chinese company, as well as the foreign investor, has since 1978 been drawn to the joint venture form. Walsh, Wang & Xin (1999) note that from the Chinese
The foreign partner can also become a competitor by selling its production in places where the parental company is already in.
Chase, R.B., Jacobs, F. R., & Aquilano, N.J. (2006) Operations management for competitive advantage (11th ed). New York: McGraw Hill/Irwin
I studied in Tokyo and Beijing and traveled to Kosovo, South Africa and India. I wrote two senior dissertations: “Climbing to the Top: the Competition between BMW, Toyota and Ford” and “The Pacific Nation: United States Foreign Policy towards China and India.” While in school, I also created a Model UN conference to more than 225 high school students. In my various roles, I have created several publications, presentations, videos, infographics and websites.
International joint ventures is an overseas business owned and controlled by two or more partners; starting such a venture is often as an entry strategy (Deresky, H. 2014.p.377), while joint ventures refers to an independent entity jointly created and owned by two or more parent company.
"To what extent did events and policies during the Cold War involving India and Pakistan determine their growth till 1991?"
The lesson learned from this is that sometimes it is easier and faster reach a new market via joint venture, even though the profit will be less, but the company can save a lot of money in studying the new market trying to understand the new culture and how they purchase and also it can minimize the risk because there is a national brand supporting the new international brand, which gives confidence and security to the customers.
The very nature of a joint venture lends itself to competitive risks. Competitive risks include: (1) opportunistic behavior; (2) misrepresentation of competencies; (3) failures to make resources and capabilities available; (4) failure to make alliance investments. The TNK-BP joint venture must deal with opportunistic behavior. Labor laws designed to limit the number of foreign nationals in top positions in natural resource companies are being exploited by TNK-BP. The Russian shareholders of AAR are using the laws to limit the number of foreign managers and specialists working in Russia. The ultimate goal is to place more Russians into top positions and to use the leverage provided by that leadership to achieve AAR objectives. The main dispute revolves around whether TNK-BP should be allowed to expand outside Russia
Also, the assets received from Interbrew that were valued at $90 million could be overvalued or at risk decreasing in value due to political tensions in the region. Looking at both the operational and quantitative part of the joint venture agreement, we believe that the investors did not get the best possible deal, mainly because their influence decreased and the assets they got from the deal can be extremely overvalued depending on how the situation evolves in that part of the world.
used assets because parents clearly delineate control (Hege.U, 2009). JVs are more on contractual basis or take the form of an agreement which helps the parties involved to access each other's assets and expertise to achieve or exploit synergies. These are also called equity alliances. During 2010 and 2011, the number of mergers and acquisitions in the oil and gas industry was very high. Total transactions in the world during 2010 hit the highest with a value of $226 billion. The main reasons for JV's to be considered in this industry are capital intensive, high risk, access to technology, access to resources, supply chain optimization, market positioning and portfolio
It is because through the joint venture, the company is more familiar with the situation of the company there. The negative outcome is that the management system different between the company. So it is hard to make a decision making. It is because there is different opinion of each person.
Baosteel and Posco : Each company agreedto invest US125 million to acquire a stake in the other, with this stake being less than 0,5 %
In order to cultivate the new project the business is likely to project the new idea as well as to have geography where the establishment of business is made possible. In the idea of expanding the resources it is necessary to make a joint venture. At X Technologies is the organization that is providing services and quality operation in field of engineering, security programs, information technology and different technological programs that can help the commercial and federal organizations. This organization is very effective for managing and introducing new improvements and advancements for increasing services of contracting vehicles. Most important feature that has considered by this organization is the teaming partners and joint venture with other