Motivations for Companies to Enter into a Joint Venture

There are a number of motivations for companies to enter into a joint venture agreement (Vaughan, 2010). These include the following:

• Risk sharing, especially in cases where high production costs might lead to a higher likelihood of failure
• Economies of scale, where individual companies can share resources and achieve global operations
• Foreign market access and overcoming geographical constraints
• Preventing funding constraints in order to develop internationally
• Overcoming acquisition barriers, in the case where an international company minimises the costs and risks of the acquisition of a foreign company.