Unlocking International Joint Ventures

CHAPTER SEVENKNOW YOURSELF AND YOUR PROPOSED PARTNER

‘Assumptions are the termites of relationships.’

– Henry Winkler

Partners are not only normally the genesis for the creation of a joint venture but are almost always the genesis of problems. IJVs fail for a multitude of reasons but all the common issues such as management conflict, misalignment on strategy between the parties, overvaluation of in-kind capital contribution, protection of intellectual property rights, disputes regarding non-competition, etc. are often linked to having a partner.

7.1 KNOWING YOURSELF IS AS IMPORTANT AS KNOWING YOUR PARTNER

However, these common problems are symptomatic of more of a fundamental failure by the Western partner – that of picking the wrong partner or not realizing that the Western company itself may not be suitable to be a partner. Although spurred by similar objectives, many Western companies are not sure whether they should be a partner (i.e. an IJV) or a boss (i.e. M&A). As outlined by Dyer et al. (2004) ‘acquisition deals are competitive, based on market prices, and risky; alliances are cooperative, negotiated, and not so risky.’ Dyer’s research also indicated that most Western investors ‘…take over firms they should have collaborated with and ally with those they should have bought, making a mess of both acquisitions and alliances.’

Not every Western company is well equipped to be a good, respectful partner in an IJV. If you are a medium-sized company established by Richard ...