Unlocking International Joint Ventures

CHAPTER TWOTHE WASHING MACHINE:HOW THE JV FORMATION PROCESS ACTUALLY WORKS

‘Normal is nothing more than a cycle on a washing machine.’

– Whoopi Goldberg

An international joint venture’s (IJV) formation is almost always presented as a simple, linear process. The journey begins with a problem, challenge or opportunity that may be addressed by forming an IJV. Then the partners carry out a number of steps which lead to the formation of the IJV. People like linear plans as it shows a way forward – a way to progress. Unfortunately, while there is some truth to this idea of a linear process, the reality, based on experience and research, is that the process is more like the wash cycle of a washing machine – it thrashes back and forth.

Although the IJV project is unlikely to proceed in a neatly linear fashion, it is useful to follow the steps in their usual order. After a decision has been made for an IJV the next step is to find a suitable partner. Then after negotiations, a JVC will be agreed and prepared for approval and signing. To illustrate the traditional view of the process, in Figure 2.1, we have taken the summary view from the academic literature combining from Beamish and Lupton (2009); Jiang et al. (2008) as well as views contained in publications of leading consulting and legal firms.¹

The energy powering the thrashing derives from the two sides attempting to align on a Compelling Proposition that works for both while also dealing with internal conditions as each JV ...