Peter J. Buckley and Mark Casson
Joint ventures (JVs) have always been an important aspect of business organization. The partnership, which is so common in the professions, is an example of a joint venture between individuals. Inter-firm joint ventures have played an important role in the expansion of MNEs into new markets-- as when a sales affiliate is established with an indigenous distribution company as a partner. Recently joint ventures have become a popular form of alliance between established MNEs, and the high profile of these ventures means that JVs have attracted much more attention (Contractor and Lorange, 1988; Harrigan, 1985; Hladik, 1985; Killing, 1983).
As a result of this trend, JVs are playing an important role in the restructuring of the international economy. In some cases they are simply transitional arrangements, associated with the gradual spinning off of an existing plant to a new owner. The joint venture, in other words, is a form of staggered divestment or acquisition. This approach may be useful in avoiding loss of face for the divesting firm, and in minimizing the risk of unfavourable political reaction when the acquiring firm is a foreign one. It also allows the diversing firm to tutor the acquiring firm in managerial and technical skills during the transition period. Given that such JVs are specifically transitional, the fact that they last only a limited time does not necessarily mean that they have failed in their purpose ( Kogut, 1988).
In other cases, however, JVs are expected to establish enduring links between the partners--as, for example, in some ventures concerning basic R&D. These ventures are often hailed as 'collaborative' agreements. This is particularly true in respect of 50:50 equity joint ventures, whose symmetry of