The joint venture approach to technology utilization

The joint venture is a little understood device for utilization of new or by-product technology that fits poorly in a firm. It is a third firm, usually formed by a smaller technology-based parent and a larger parent with marketing and financial resources to contribute. Joint ventures are new, rational creations, the result of objective analysis of a technical-commercial opportunity rather than adaptation to market or competititive forces. Problems arise from the differing size and objectives of the parents, agreeing on key personnel, and integrating personnel quickly into the new organizational team. When two corporations combine a portion of their assets to create a new organization, it is commonly called a joint venture. The joint venture form of corporate organization has been extensively employed in a wide range of industries, including oil and gas, steel, and real estate. The oil, gas, and steel industries have used joint ventures to facilitate forward and backward integration. In the real estate development industry, the temporary joint venture company is an effective approach to a major engineering or construction project which requires large amounts of capital, engineering skills and equipment. Firms also establish production and marketing capabilities in foreign countries with the assistance of a joint venture partner in the foreign country. More recently, joint ventures have been formed to engineer, produce and market a product innovation. This research focused on the new product joint venture organization. We define a new product joint venture as a new legal entity or organization formed with the patents, technical skills, a marketing system and managerial experience from two independent contributing corporations for the purpose of developing, producing, and marketing a product innovation. Previous research suggested the use of joint ventures for internal ventures that had been abandoned or were in a state of limbo between success and failure. Upon looking into the literature, we discovered that very little systematic attention had been given to the study of the new product joint venture. As Peter Drucker recently wrote: The joint venture is the most flexible instrument for making fits out of misfits. It will become increasingly important. It is at the same time the most demanding and difficult of all tools of diversification — and the least understood. Two journal articles have briefly suggested the increased use of joint ventures for product innovation. Adler has described and proposed a number of joint venture approaches which he collectively refers to as “symbiotic marketing.” He regards product innovation joint ventures as the most advanced form of “symbiotic marketing.” Our study was conceived as a start toward closing the information gap in regards to new product joint ventures.