Senior Partner & Managing Director; Global Leader, People Team Chair
Joint ventures allow one organization to tap into another’s expertise, infrastructure, and customer base to pursue new growth opportunities—without shouldering all of the risk alone or buying the company outright.
Joint ventures are collaborations in which two or more companies jointly invest in an activity and share the risks and potential returns, while remaining independent economic agents. Some involve the creation of a new legal entity but most joint ventures are simply long-term strategic relationships with greater complexity and closer collaboration between partners.
They can be extremely useful in situations characterized by high uncertainty or unpredictability; in international markets or new industries with growth opportunities that a company can’t or doesn’t want to pursue entirely on its own; or when complementary skills and capabilities are needed to develop or provide innovative offerings. But unclear governance, operational inefficiencies, and lack of commitment can offset any advantages a joint venture offers.
Are you thinking about pursuing a joint venture? Before choosing the best approach for your company, weigh the following advantages and disadvantages: