Development Economics - Joint Ventures and Developing Countries

In this short revision video we examine the potential importance of joint ventures in supporting growth and development in low and lower-middle income countries.

Joint ventures between businesses in advanced and developing countries can have a number of advantages and drawbacks.

Advantages

• Access to new markets: Joint ventures can help businesses to access new markets that they would not be able to enter on their own. This is because the joint venture partner may already have a presence in the target market.
• Access to new technologies: Joint ventures can help businesses to access new technologies that they would not be able to develop on their own. This is because the joint venture partner may have expertise in a particular technology area.
• Reduced risk: Joint ventures can help businesses to reduce the risk of failure. This is because the joint venture partner shares the risks and rewards of the venture.
• Increased efficiency: Joint ventures can help businesses to increase efficiency by pooling resources and expertise.
• Transfer of knowledge and skills: Joint ventures can help to transfer knowledge and skills between businesses in advanced and developing countries. This can help to improve the productivity and competitiveness of businesses in developing countries.

Drawbacks

• Loss of control: Joint ventures can lead to a loss of control for the business. This is because the joint venture partner will have a say in the management of the venture.
• Conflicts of interest: Joint ventures can lead to conflicts of interest between the parties. This is because the parties may have different goals and objectives for the venture.
• Disagreements: Joint ventures can lead to disagreements between the parties. This is because the parties may have different opinions on how to manage the venture.
• Termination: Joint ventures can be terminated by either party. This can be a costly and time-consuming process.

Do they help promote growth and development in low-income nations?

There is some evidence to suggest that joint ventures can help to promote growth and development in low-income nations. For example, a study by the World Bank found that joint ventures between foreign and domestic firms in developing countries led to increased productivity, exports, and wages.