Joint Venture Strategies

Joint Venture Strategies

Design, Bargaining, and the Law

Zenichi Shishido, Munetaka Fukuda and Masato Umetani

Although they have the potential to create synergies, joint ventures by their nature contain inherent risk. Therefore, each partner in a joint venture needs to incentivize each other in order to maximize their own payoff. Extensive pre-contractual and post-contractual bargaining is essential. This book provides successful bargaining strategies from the point of view of each partner company. Using game theoretical framework to analyze joint venture strategy, it describes practical and legal issues that arise when creating synergies and incentive bargaining in a joint venture. With a particular focus on intellectual property law, including analysis based on many real cases, the book covers issues relating to creating synergies, corporate law issues of conflicts of interest, and antitrust law issues relating to cooperation between independent companies.

Chapter 6: Synergies

Zenichi Shishido, Munetaka Fukuda and Masato Umetani

Subjects: economics and finance, game theory, law and economics, law - academic, company and insolvency law, law and economics


In deciding whether to establish a joint venture, each prospective partner should determine the total return it can realize by establishing the joint venture and identify the risks of the joint venture plan. In other words, each partner should individually ascertain the benefits and drawbacks of partnering with another. This chapter discusses those benefits in terms of synergies, while Chapter 2 discusses drawbacks in terms of opposing interests and risks. Immediately below, synergies are defined as the total return that partners can realize by participating in a joint venture. In the second section, 11 objectives of participating in a joint venture from the standpoint of synergies are discussed. Finally, in the third section, the topic turns to antitrust restrictions that JV partners may run afoul of in their pursuit of synergies. In the fourth section, we look at the basis for establishing a JV company to realize synergies instead of merely forming a contractual alliance. This book uses the term synergies to mean the total return that partner companies are able to realize by establishing and operating a joint venture. While the concept of synergies can have various meanings, it generally refers to economies of scope or, from a macro standpoint, social utility (e.g., benefits to consumers/workers, regional economic development) spawned by a synergistic alliance between two companies.

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