Joint venture

Competencies required

In a joint venture, each JV party brings its own set of competencies. One may bring R&D and manufacturing expertise, while the other brings marketing and distribution capabilities. The idea is to find a partner with complimentary skill sets, to create synergies in the relationship.

Resource investment

Again, this depends on the nature of the deal. The investment could be as much as is required for direct investment. However, in most joint ventures there is some degree of sharing of the investment in, and ongoing costs of, commercialisation.

IP protection

The nature and strength of the IP protection is probably not a strong influence on whether a JV is a feasible option for commercialisation (unless one partner is relied upon solely for its ability to generate IP). While a strong IP position is desirable, the parties are primarily engaging with each other for perceived complimentary competencies, and it is the resulting synergies that provide competitive advantage.

Competitive landscape

Joint ventures or collaborative arrangements appear to occur more frequently in industries controlled by a number of large corporations, where barriers to market entry are high. These players are looking for new initiatives to give them an edge over competitors, and may partner with a smaller player through a joint venture to achieve this. For example, the telecommunications industry relies on small technology companies to develop new uses/applications for the technology marketed by the industry behemoths, and large pharmaceutical companies partner with small biotech companies in the hope of finding the next big drug.

Risk and return

Each JV party shares some degree of the risks inherent in the commercialisation. The returns to each party will generally reflect that party share of the risk.

Advantages

• Pooling of complimentary resources and competencies
• Synergistic effects of collaboration
• Sharing of risk
• Some control over the process, technology and strategy is retained

Disadvantages

• Sharing of rewards
• More administration
• Risk of relationship failure
• Still potentially high capital investment required