Wednesday, July 24, 2013

When Joint Ventures Fall Apart

The Wall Street Journal reports today that Ford and Toyota have chosen to end a partnership focused on hybrid vehicle development.  The article offers some speculation about why the partnership was dissolved, but it's not quite clear what all the reasons are.  The story does offer us a good opportunity to comment on some of the reasons why joint ventures do fail:

1.  Disagreements and concerns about intellectual property protection - who exactly owns the IP, and how does a firm protect the IP that it does not want to share/lose to its partner or any other rival?

2.  Culture clash - different firms have contrasting styles of decision-making and leadership, as well as different values and norms

3.  Strategic misalignment - the firms have a different view of how and where to compete in the future, or they potentially cannot overcome the challenges and conflicts of interest associated with head-to-head competition in many markets

4.  Catching up vs. Holding you back - Firms sometimes engage in joint ventures as a mechanism for "catching up" in an area in which they lag technologically (or otherwise).   However, at some point, the joint venture may hold you back.  If you have caught up sufficiently, you may wish to reduce your dependency on the partner at some point and focus more on internal capability development

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