A growing number of US-based companies are setting up international joint ventures with foreign partners, according to a Conference Board study. The study is based on surveys and interviews with 168 companies, most of them headquartered in the US.
Joint ventures are booming in virtually all areas of the world, involving both private and local governments.
About half of the firms surveyed have embarked on joint ventures in the past five years. Most Fortune 500 companies are involved in about one international joint venture, as are 40 percent of the industrial firms that have more than $ 100 million in sales.
While most US firms still prefer to operate alone, many are finding international joint ventures very lucrative. About half the surveyed firms say their foreign joint ventures are just as profitable as the business units they own fully and about 12 percent rate them even more profitable.
A rising need for new markets is cited as the primary reason for the increase in joint ventures. About half the firms in the study say they are using joint ventures to enter "attractive new markets."
Growing nationalism is also a major factor, especially in third-world countries. More than one-third of the firms have established joint ventures to meet local government requirements. Cited as other major reasons for joint ventures: to acquire badly needed raw materials, to limit overall financial risks, to set up export bases, and to sell technology abroad.