Question

Coastal Pharma and Brainwave Technologies have together invested and created a new organization, InnerView, to focus on developing diagnostic devices. Through this new firm, both companies are attempting to combine their core competencies to innovate and reduce their risks associated with transaction-specific investments. However, the new organization operates independent of Coastal Pharma and Brainwave Technologies. Which of the following alternatives to integration does this scenario best illustrate?A. A joint venture
B. A franchisee
C. A licensing contract
D. A corporate acquisition

Answer 1

Answer: Option (A)

Explanation:

Joint venture is referred to as a business organization entity which is created by either two or more parties. It is generally characterized or recognized by a shared ownership, i.e. shared risks and returns, and thus shared governance. Organizations usually pursue the joint ventures either for one of the following four reasons:

1. In order to have access to a new market

2. In order to have gain the scale efficiencies that is done by either combining assets or operations

3. In order to have share risk and profit for the major projects

4. In order to have access to capabilities and skills.