Joint Venture

A joint venture is an association of firms or individuals formed to undertake a specific business project.  It is similar to a partnership, but limited to a specific project (such as producing a specific product or doing research in a specific area). 

 

Joint ventures can become an issue for competition policy when they are established by competing firms.  Joint ventures are usually justified on the grounds that the specific project is risky and requires large amounts of capital.  Thus, joint ventures are common in resource extraction industries where capital costs are high and where the possibility of failure is also high.  Joint ventures are now becoming more prevalent in the development of new technologies.

 

In terms of competition policy, the problem is to weigh the potential reduction in competition against the potential benefits of pooling risks, sharing capital costs and diffusing knowledge.  At present there is considerable debate in many countries over the degree to which research joint ventures should be subject to competition law.