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Joint VentureJoint Venture
Joint Venture Company
Inputs
MNE Local Firm
HOME COUNTRY HOST COUNTRY
Inputs
Share of Profit
Share of Profit
Joint VentureAdvantages
• Access to partner’s local knowledge
• Reduction of concern about overpayment
• Both parties have some performance incentives
• Significant control over operation
Disadvantages• Potential loss of proprietary
knowledge• Potential conflicts between
partners• Neither partner has full
performance incentive• Neither partner has full
control
When Is a Joint Venture Appropriate? Both partners contribute hard-to-measure inputs Large expected mutual gains in the long-run Trade secrets can be walled off