Transnational joint ventures

Contents:

• Features of transnational joint ventures
• Advantages of multinational joint ventures
• The impact of TJV on the state

Transnational joint ventures (TJV) are a form of business in which companies from different countries combine their resources and knowledge to achieve a common goal. TJV can be created both on an ongoing basis and for the duration of a specific project.

In this article, we will take a detailed look at the features of multinational joint ventures and their strengths.

Features of transnational joint ventures

Transnational joint ventures are created with the aim of developing business in the international market, mixing national cultures and exchanging experience and capital among businessmen from different countries.

As a rule, all TJV have common features, which are as follows:

• The presence of cultural differences. TJV may encounter cultural peculiarities that project participants have. This applies to different languages, customs, values and norms of behavior. All this can lead to misunderstandings and conflicts between the parties, so it is important to take into account risks and factors, as well as strive for mutual understanding.
• Differences in legal systems. Each sovereign State has its own legal system, which usually differs from the norms of law of other countries. This can lead to difficulties in resolving disputes between project participants. That is why it is important to take into account the differences in legal systems and conclude contracts that will take into account the legal norms of each country.
• Differences in economic conditions. Financial and tax laws and regulations may vary significantly from country to country. Differences in tax rates, import and export tariffs, inflation and other economic indicators can lead to an uneven distribution of risks and costs between project participants.
• Different views on project management. Managing a TJV can be difficult due to differences in culture, legal systems, and economic conditions. Project management requires a high degree of interaction and coordination from project participants. Therefore, it is important to develop an effective project management system that will take into account the specifics of the TJV.

Advantages of multinational joint ventures

Many lawyers believe that the role of such corporations is ambiguous. For sure, they can be characterized as large companies that have significant assets, revenue and profit. The latter can be many times higher than the annual budget of individual states.

For sure, multinational joint ventures account for more than half of the world’s industrial production, which expands the market and provides a large number of jobs in different countries.

In general, we can highlight the following advantages of TJV:

• Market expansion. TJV can help companies expand their market by combining resources and knowledge from different countries, which can lead to the creation of new products and services that will be more competitive in the international market.
• Risk reduction. The creation of a TJV allows you to reduce the risks associated with business in other countries. Each participant bears his own share of risk, which makes it possible to distribute responsibility among the project participants.
• Increased efficiency. TJV can increase the efficiency of companies by combining resources and knowledge from different countries, which will reduce project execution time and improve the quality of products or services.
• Expansion of geography. TJV can help companies expand their geography by combining resources and knowledge from different countries, which can lead to the creation of new products and services that will be more in demand in other regions.
• Cost allocation. Creating a TJV allows you to distribute costs between project participants, which will reduce financial risks and distribute responsibility between companies.

The impact of TJV on the state

In many countries, TJV are inherently monopolies, which can make it difficult for smaller firms to enter the market. This certainly affects the consumer. The lack of competition affects the price of goods or services. Despite this, many states support the TJV with subsidies, since the economic stability of the country depends on companies. In addition, multinational companies, due to the specifics of their device, can legally circumvent the existing tax legislation, which greatly reduces their tax burden.

Because of this, multinational joint ventures are often criticized, which is associated with:

• Their dominance in the market in this niche of goods or services.
• In the desire to maximize profits by any means.  
• Displacement of smaller firms from the market.
• Threat to the environment due to unreasonable consumption.

In conclusion, it can be noted that transnational joint ventures are an effective way to combine the resources and knowledge of companies from different countries to achieve a common goal. Creating a TJV allows you to expand the market, reduce risks, increase the efficiency of companies, expand the geography of activities and distribute costs among project participants. It is important to take into account the specifics of the TJV, such as cultural differences, differences in legal systems and economic conditions, and develop an effective project management system.

If you need advice on the creation and operation of a multinational joint venture with a partner from another country, you can contact VALEN. We will study the situation in detail and give valuable recommendations.