Between 1991 and 2001, the average number of joint-venture deals announced each year increased dramatically from 1,000 to 7,000. As that trend seems to be continuing, executives are clearly setting great store in these temporary partnerships as a way of achieving both short-term and longer-term goals.
Are they getting all they hope for? The answer is murky. While it has been argued that 50% to 60% of joint ventures fail, the definition of success and failure is blurred.1 Joint ventures last an average of six years and are then terminated for any number of reasons. Sometimes success is clear, as the partners have achieved the strategic and financial goals they sought when they began the venture. In other cases, the competitive environment has evolved so that the partnership no longer makes sense for one of the companies, and it sells its stake to the other partner (85% of joint ventures end with the acquisition of the venture by one of the original partners). In China, for instance, joint ventures were once the only way for foreign companies to gain access to that market; when the law changed to permit wholly owned subsidiaries, companies began to terminate joint ventures in order to fully consolidate operations and gain efficiencies. Although not all terminations have such neat explanations, joint ventures are increasingly viewed as strategic... To read the complete article, login or sign-up using the form below.
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