Marketing Strategy

International Joint Ventures in Developing Countries

R O B E R T M I L L E R , J A C K G L E N , F R E D J A S P E R S E N , A N D YA N N I S K A R M O K O L I A S

International joint ventures offer attractive opportunities, yet they frequently perform unsatisfactorily. Why do they run into trouble, and what can partners and managers do to maximize the chances of success?

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

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OINT 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

Robert Miller, a US national, is a Consultant to the International Finance Corporation’s Economics Department.

Jack Glen, a US national, is a Principal Economist in the International Finance Corporation’s Economics Department.

Fred Jaspersen, a US national, is Lead Economist in the...