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Joint Ventures and Alliances

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.

The Advantages and Disadvantages of Joint Ventures

Are you thinking about pursuing a joint venture? Before choosing the best approach for your company, weigh the following advantages and disadvantages:

ADVANTAGES

  • Gain access to capabilities, expertise, and resources—including staff and technology.
  • Create value and synergies by combining complementary strengths.
  • Share risk, cost, and resources, minimizing potential damage for both.
  • Fully align business objectives and incentives.
  • Ability to opt for a pre-agreed life span; end partnership with clear exit mechanism.

DISADVANTAGES

  • Joint ventures are complex and are time-consuming to form.
  • They require an intricate governance structure due to each partner’s business agenda, as well as the objectives of the joint venture itself.
  • There is limited flexibility and direct control by partners.
  • Joint ventures run the risk of corporate culture clash, misalignment or conflict between partners, as well as IP infringement.
  • It is difficult to attract and retain talent in the joint venture organization.


Meet BCG's Experts in Joint Ventures

M&A and Divestitures
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