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JOINT ventures between domestic companies in developing countries and foreign companies have become a popular means for both managements to satisfy their objectives They offer at least in principle an opportunity for each partner to benefit significantly from the comparative advantages of the other Local partners bring knowledge of the domestic market familiarity with government bureaucracies and regulations understanding of local labor markets and possibly existing manufacturing facilities Foreign partners can offer advanced process and product technologies management know-how and access to export markets For either side the possibility of joining with another company in the new venture lowers capital requirements relative to going it alone As attractive as joint ventures might seem however they frequently perform unsatisfactorily and are comparatively unstable This seems to be true even when the partners are two companies from the same industrial country international joint ventures seem to be more vulnerable still In a study of the latter Killing 1982 for example 36 percent were rated by participants as having performed poorly--a high proportion indeed An obvious set of questions therefore arises If international joint ventures are established to exploit the complementary features of each partner why are the partners frequently disapointed with their joint performance What problems cause them to be unstable Can these problems be alleviated to improve these ventures prospects for success On behalf of the International Finance Corporation IFC we surveyed joint ventures between domestic companies in developing countries and foreign companies based in industrial countries to try to understand the difficulties that arise in negotiations leading up to a joint venture agreement and those that arise during the ventures implementation and operation About 75 joint ventures in 6 countries were included in the study Negotiating agreements The managers we contacted expressed mixed feelings about the formal joint venture agreement with some managers viewing it as a critical element in defining the longer-term relationship and others discounting its significance The latter group tended to stress
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