Research Paper (postgraduate) from the year 2011 in the subject Business economics - Business Management, Corporate Governance, grade: 1.3, Zeppelin University Friedrichshafen, language: English, abstract:The concept of the joint venture was developed in the United States. First, we need to makea distinction between purely contractual, non-equity joint ventures, on the one hand, andequity or corporate joint ventures, on the other.The regular form of joint venture is a company that is founded out of equity provided fromtwo other entities. This venture is similar to a business partnership but limited to a specificproject or purpose.The equity joint venture manifests the founding firms willingness tocooperate by providing each a certain percentage of the common capital stock as illustratedin the graphic below (in this case with each partner providing half of the capital stock).Thereare countless ways to build up an equity joint venture with each partner providing only acertain percentage of the common capital stock (e.g. 70/30%, 90/10%, 51/49% and soforth). The firms gain control over the founded joint venture and share revenues, expensesand assets in equal proportion to their respective contributions to the venture s registeredcapital. Differing arrangements are possible.Over the last decade, we were able to witness rapidly growing companies, some of themseeking for partnerships to take advantage of positive synergy effects to gain in size or toenter new foreign markets. The topic of this essay should be why firms seek to venture,what the benefits of venturing are and why some firms fail after the venture, what arethe downsides of this concept?
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