A Model of the Joint Venture Process in International Business
Trade between developed countries has so accelerated in recent decades that it tends to obscure the less obvious returns but considerable potential of business opportunities in the developing nations. To the businessman thinking of investing in an underdeveloped market the whole issue is fraught with uncertainties, of which the structuring of investment and choice of partners are perhaps the most important and perplexing.
With this book, J. W. C. Tomlinson, Senior Lecturer in International Business at the Manchester Business School, Manchester, England, paves the first steps in the path of such businessmen, especially those interested in investment in India or Pakistan. He sets up a framework for a model of the decisions and dimensions involved in establishing and operating joint ventures in international business.
The author bases his study on evidence collected from top executives of 50 British firms with investments in India and Pakistan. Some of his conclusions may be surprising. He finds, for instance, that the profitability of joint ventures seems to be inversely related to the size of the foreign parent company and to the latter's predilection for control over a joint operation. He also finds that the apparently attractive compromise of 50-50 joint ventures usually turns out to be a snare and a delusion. In general, given more effective search procedures, there are more potential local associates for joint ventures in less-developed countries than the literature suggests. Most significantly, host government partners are rarely a hindrance and often the most compatible associates for a foreign investor.
It appears that the decision to go into a joint venture, the selection of partners and the manner in which it is set up are only partially determined, if at all, by considerations of bilateral monopolistic advantage. Initiation, promotion and development of new ventures tends to be the responsibility of individuals or special interest groups.
Hitherto, the area of joint operations in international business has only been examined descriptively. Here is a study which analyzes the subject rigorously and in depth, providing detailed information of the results of a type of operation which is likely to become increasingly significant.