Internationalization brings indubitable advantages to companies in terms of profitability, performance, commercial growth, finance, human resources, corporate image, risk diversification, etc. hard to cope with alone for a SME given its limited resources and capabilities (EU Commission, 2007).
Thus, companies may opt for an internationalization strategy using a joint venture agreement with a local entity that complement their weaknesses.
A joint venture is a business agreement among two or more companies to co-operate in a specific and limited way sharing resources, capabilities, efforts, risks, liability, revenues, expenses and assets in order to gain access to new niche markets.
Types of Joint Ventures:
Corporate joint-ventures / equity joint-venture: it is a form of collaboration that sets up a new entity or a new corporation. This new element is under a high rigidity and complexity due to the different legal implications of each country.
Non-corporate joint-ventures: it is a contractual agreement that does not generate a new entity.
All joint venture members assume the losses in an agreed proportion and its obligations are limited to the obligations of the own joint venture.