International joint ventures (IJVs), the second type of equity based cross-border alliance, have experienced tremendous growth during the last two decades as well. They will continue to represent a major means of global expansion for MNEs. In emerging economies such as China they represent the dominating operation mode for MNEs’ market entry.
According to a well-known definition by Shenkar and Zeira an IJV is: A separate legal organization entity representing the partial holdings of two or more parent firms, in which the headquarters of at least one is located outside the country of operation of the joint venture. This entity is subject to the joint control of its parent firms, each of which is economically and legally independent of the other.
An IJV can have two or more parent companies. Many IJVs, however, involve two parent companies. Problems will get even more complex with more than two partners. The equity division between the parent companies of the joint venture may differ. In some cases the ratio is 50:50, in others the dominance of one partner becomes more obvious with ratios of 51:49 or through various other combinations. This, of course, has implications for the control of the IJV. In contrast to M&As, the parent companies of an IJV keep their legal identity and an additional new legal entity representing the IJV is established.
Possible additional relational interfaces
Key Advantages of International Joint Ventures
Penetrating protected markets
Lowering production costs
Sharing risks and high R&D costs
Gaining access to marketing and distribution channels •
Gaining access to...
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