19 Joint Ventures

1. Introduction: Reasons for their Formation
There are many situations in which a business undertaking, looking at possible future commercial activities, will decide that it needs a partner (or even more than one) to share in a particular project. Whilst the natural desire to 'go it alone' may be strong, an undertaking often has to acknowledge that the devel­ opment of existing products (let alone the research and development required) may demand investment too great for its own resources. It may, for example, have adequate personnel but inadequate finance; alternatively, whilst finance may be no problem, its staff may lack the required expertise. This is particularly likely in areas of quickly developing high technology, such as electronics, computers, media providing information, and entertainment and telecommu­ nications, in which an increasing number of undertakings are now involved.The task of choosing a partner is never easy and necessarily involves careful consideration of the known abilities and resources of undertakings which might be expected to be one's chief rivals in this new field. Such undertakings may be actual or merely potential competitors. Occasionally the undertaking being considered for partnership may not be a competitor, actual or potential, but may have expertise in a totally different area which may offer possibilities for combi­ nation to create novel products or services. The degree of co-operation proposed may be limited, e.g. the operation of joint purchasing arrangements or shared laboratory work, or it may be very extensive, e.g. a proposed merger of the parties' entire interests in a particular field with a consequential need to give up their individual business in that market in favour of the new joint enterprise.What will be required in every case is a structure adequate to support the task which the joint venture will carry out. Clearly mere expressions of inten­ tion and goodwill are insufficient; there has to be a tangible commitment of resources. At the least it would seem necessary:
I. (i) to create either a separate legal undertaking or a recognizable joint committee clearly identifiable as separate from its founders;
II. (ii) for the founders to transfer personnel and assets (often including intel­ lectual property rights) to the new undertaking;
III. (iii) to allocate to the new undertaking by formal decision responsibility for carrying out the functions decided upon by its founders: and
IV. (iv) to establish effective joint control of the joint venture by its parents.

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