1.1. The essence of joint ventures.

The history of joint ventures began in the 19th century. One of the first joint venture production plants was built in Prussia in 1815, by the Belgian company "Kokeril". In this case the owners of the company were not Belgians and the technology was not Belgian, it was English. The integration trends in the global economy stimulated the increase in the number of joint ventures. The creation of joint ventures allows developing new markets and realizing projects that are beyond the power of a single company. Joint ventures entrepreneurs can improve their competitive position; mobilize capital gaps, in some cases to skip trade barriers. Thus, at the present time new forms of international economic relations have developed. Joint ventures are taking special place among them.

Joint Venture (JV) is a form of integration of production, trade, research and other activities. It is a form of international cooperation with foreign countries, which is characterized by the property association partners for their participation in the union of production and sales, profit division, as well as existence of industrial and commercial risks associated with its activities. Participants of joint ventures can be both national and foreign legal and natural persons. Joint ventures allow to make scientific researches in new areas, to combine resources from several companies when each of them individually does not have sufficient resources to carry out their own works, and they can distribute the risk connected with the development of a new product among the participants. Creation of joint ventures is a new form of division of the market, form of agreement between the firms on joint exploitation of new production areas.

As there are good business and accounting reasons to create a joint venture (JV) with a company that has complementary capabilities and resources, such as distribution channels, technology, or finance, joint ventures are becoming an increasingly common way for companies to form strategic alliances.

In a joint venture there are two or more "parent" companies agree to share capital, technology, human resources, risks and rewards in a formation of a new entity under shared control. Important factors to be considered before a joint venture are:

• screening of prospective partners

• joint development of a detailed business plan and shortlisting a set of prospective partners based on their contribution to developing a business plan

• due diligence - checking the credentials of the other party ("trust and verify" - trust the information you receive from the prospective partner, but it's good business practice to verify the facts through interviews with third parties)

• development of an exit strategy and terms of dissolution of the joint venture

• most appropriate structure (e.g. most joint ventures involving fast growing companies are structured as strategic corporate partnerships)

• availability of appreciated or depreciated property being contributed to the joint venture; by misunderstanding the significance of appreciated property, companies can fundamentally weaken the economics of the deal for themselves and their partners.

• special allocations of income, gain, loss or deduction to be made among the partners

• compensation to the members that provide services

A joint venture takes place when two parties come together to take on one project. In a joint venture, both parties are equally invested in the project in terms of money, time, and effort to build on the original concept. While joint ventures are generally small projects, major corporations also use this method in order to diversify. A joint venture can ensure the success of smaller projects for those that are just starting in the business world or for established corporations. Since the cost of starting new projects is generally high, a joint venture allows both parties to share the burden of the project, as well as the resulting profits.

An international joint venture is only one of a variety of means by which a domestic owner of a technology can exploit or develop that technology in a foreign market. Before embarking upon a joint venture, a technology owner should examine the relative advantages and disadvantages of the other vehicles for foreign market entry. In addition to joint ventures, the methods of exploiting a technology in a foreign market include exports, licensing and other contractual arrangements, and direct investments. It is important at the outset to distinguish a joint venture from other types of business arrangements so that the advantages and disadvantages of a joint venture can be viewed in proper perspective. Certain business arrangements often are incorrectly referred to as joint ventures.

A joint venture is not merely a contractual undertaking by two or more parties to collaborate on and perform a specific task or one-time project. The sometime reference to such arrangements as "contractual joint ventures" is the source of some of the confusion surrounding the nature of a true joint venture. A joint venture also is not merely a contractual arrangement by two or more parties to cooperate in the pursuit of a particular contract and, if successful, to perform such a contract by dividing the prescribed tasks in accordance with the respective qualifications of the parties. This kind of association is sometimes called a "consortium" or a "teaming arrangement." Furthermore, a joint venture is not merely a patent and technology agreement calling for the conveyance of rights and the physical transfer of technology.