Why Joint Ventures?
As there are good business and accounting reasons to create a joint venture (JV) with a company that has complementary capabilities and resources, such as distribution channels, technology, or finance, joint ventures are becoming an increasingly common way for companies to form strategic alliances. Sustainable Competitive Advantage In a joint venture, two or more “parent” companies agree to share capital, technology, human resources, risks and rewards in a formation of a new entity under shared control. Important Factors to be Considered Before a Joint Venture is Formed • screening of prospective partners • joint development of a detailed business plan and shortlisting a set of prospective partners based on their contribution to developing a business plan • due diligence – checking the credentials of the other party (“trust and verify” – trust the information you receive from from the prospective partner, but it’s good business practice to verify the facts through interviews with third
