Joint Venture
Joint venture is a separate corporateentity in which two ormore companies have
an ownership stake
Joint ventures (JVs) are an integral component of the competitive landscape and a tool that many firms use to create value. One of the most fundamental JV decisions a firm needs to make is the extent to which a JV will be oriented towards exploration or exploitation. Firms establish exploratory JVs to discover new opportunities and enhance learning; such JVs are characterized by distant search, knowledge creation, risk taking, experimentation, and innovation. In contrast, exploitative JVs leverage existing knowledge and technologies to commercialize established products or product extensions or enter new markets at lower costs; these JVs are focused on product or market refinements, efficiency improvements, and in general the “use and development of things already known”). Firms strive for the appropriate balance between exploration and exploitation but are often compelled to act within constraints that create tendencies toward one or the other
Joint ventures have a number of advantages. First, a company may feel that it canbenefit from a local partner’s knowledge of a host country’s competitive conditions,culture, language, political systems, and business systems. Second, when the development
costs and risks of opening up a foreign market are high, a company might gain bysharing these costs and risks with a local partner. Third, in some countries, politicalconsiderations make joint ventures the only feasible entry mode. Despite these advantages, joint ventures can be difficult to establish and run .
⠀ Hill, C. W. L., Jones, G. R. (2008). Essentials of strategic management(2nd ed.). Cengage Learning (P. 155).
⠀ Connelly, B., Shi, W., Hoskisson, R., & Koka, B. (2018). Shareholder influence on joint venture exploration. Journal of Management. https://doi.org/10.1177/0149206318779128.