Joint ventures or popularly referred to as JVs have been gaining a lot of attention from businesses. And businesses look into these joint ventures for more business opportunity and competitive edge in globalization.
A joint venture is an entity formed by two or more business parties to take on an economic activity together. This is usually between a local and foreign business entity. Parties involved in a JV usually contribute equity and then split the expenses, revenues, and control of the established entity or enterprise. It has a more defined arrangement between parties because of the stakes involved unlike a strategic alliance. Besides these stakes, other issues like technology transfer are also a prime concern and not all companies have a uniform response to this – some like it, others don’t especially those into the technology products and services sectors.
JVs are now becoming more popular between western and Asian countries and the most number of joint ventures are found in China. Almost all automotive manufacturers in the world have formed equity JVs aimed at lowering production cost. Other reasons for forming joint ventures are: spreading costs and risks, better access to financial resources, pre-empting competition, speed to market, etc. And recently, for China in particular, its government has revamped their policies on joint ventures to loosen and tighten restrictions on foreign parties.