According to this, increasing globalization has made going it alone a better strategy than joint ventures when it comes to expanding overseas.
For many multinational firms doing business in unfamiliar countries, it made sense to create joint ventures with local firms. After all, that local knowledge of customs, suppliers, and markets could save the newcomer months—maybe even years—of riding a painful learning curve.
But new research on more than 3,000 American transnationals suggests that JVs are falling out of favor. Why? Increasing forces of globalization such as increasingly fragmented production processes make the decision not to collaborate pay off.
That's one finding from work done by Mihir A. Desai, HBS professor in finance and entrepreneurial management, done with colleagues C. Fritz Foley and James R. Hines Jr. at the University of Michigan. Their research will appear in a forthcoming issue of the Journal of Financial Economics.