A joint venture is among the most favorite international market access styles used by several firms, but a high rate of failure accompanies it. A joint venture is a distinct legal, organizational unit in which at least two independent partners economically, geographically, and legally participate. Many regional and international corporations use the mutual endeavor strategy as a way of entering the market, especially in developing countries (Dhir, 2017). I am interested in this concept due to my academic curiosity. It is a popular institutional form that is selected by less industrialized countries in their attempt to welcome direct foreign investments and knowledge. It is a broad concept through which partnerships with foreign investors will increase knowledge transfer through technology development, and also increase employment chances in the indigenous country and grow the flow of overseas exchanges.
After reading an article by Yan & Luo (2016), on International Joint Ventures: Theory and Practice, I grew academic curiosity on the topic of Joint Venture. A joint venture is used in individualistic grown economies as a strategic option. A foreign company cannot come into a new economy and open a branch straight in the resident market, in an attempt to solve this, the external company merges with the local company and forms a joint venture. The key requirement in understanding joint venture is that the foreign companies mutually decide with the local company to build a legitimate institution to part possession, income or loss, and other advantages attached to the business. Also important to this is that joint venture experience a high rate of failure due to variances in strategy planning, culture, and shaping.
According to Yan & Luo (2016), Joint venture is one of the most favorite international market ventures. It involves two or more organizations that are legally formed, each playing a part in the activities of making decisions of the jointly owned entity. A joint venture is said to be international when at least one head of the jointly owned entity is based outside the venture country of actions, or if the joint venture has a bigger operation level in more than one country. In an international setting which is changing rapidly, there is powerful technology and timely competition which make the main changes around the political and economic sectors of the world. Joint venture relates closely to the increase in employment as we get new owners and entity controllers.
However, Yan & Luo (2016), say that the joint venture suffers a high rate of failure since it has more than two parent organizations. It is established that 47% of the firms are made up of three initial firms. A study in this article positions that if a joint venture is made up of many parent companies, then it means that it will be prone to failure.
Yan & Luo (2016), said that for the success of a joint venture, there should be a flow of essential capitals and a shared indulgent among the initial companies. The required capitals and achieved skill of joint ventures initial companion are crucial to propel the association, which creates hope and the needed indulgent. Companies are supposed to look for possible associates who have joint venture skills and must have enough information to offer balancing capitals. Strength both in the market and technology and export alignment are some of the other essential elements for the success of joint ventures. Different from industrialized countries, emerging countries require local parental mechanism and good technology to realize success in their joint ventures.
The cited work relate specifically to the content of this paper in that it offers a clear insight and a broader view on how the concept of the joint venture influences the ability of the firm to distinguish their product assistances from those of contestants and how they will decide if supporting companies will help in standardization of the configuration of their products arrangements across markets so that they can give their ventures more operating autonomy. In their article, Van der Meer-Kooistra & Kamminga, (2015), say that changing particular partner’s strategy, selecting the right strategy for joint venture and the competitor’s action should be emphasized during any alterations in the venture. The article provides that the dynamics of the owner of the enterprise and the collaboration of the partner are supposed to be accustomed to possible variations in the needed strategic respective, ability and the accomplishment of other proprietors in the joint venture.
The materials researched was in line with the cited article. The 5 articles offer vast knowledge on the concept of a joint venture. For example, Shepherd & Zacharakis, (2018), carried out empirical studies by meta-analysis to investigate the link amid culture and decision-making tactics. The results in this article show that characteristic cultures prefer a forcing approach to moreover cooperative cultures. This means that cooperative cultures employ thinning, negotiating, and problem-solving tactics than that used in a capitalistic setting during joint venture. Killing (2017), pointed out that to manage joint venture and get successful results the critical factors needed are the performance, development of a powerful human resource, practices founded on several listed features, quality performance, training competence, adaptation and flexibility, technology performance, sharing of resources.