Which of the Following Is a Disadvantage of Joint Ventures

question 109

Multiple Choice

Which of the following is a disadvantage of joint ventures?

• A) It gives a firm the tight control over subsidiaries that it might not need to realize experience curve or location economies.
• B) A firm that enters a joint venture risks giving control of its technology to its competitors.
• C) The shared ownership arrangement can lead to conflicts and battles for control between the investing firms if their goals and objectives change or if they take different views as to what the strategy should be.
• D) When the development costs and/or risks of opening foreign markets are low, a firm might gain by sharing these costs and/or risks with a foreign partner.
• E) A firm does not gain any local expertise

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Definitions:

Sarbanes-Oxley Act

A U.S. federal law enacted in 2002 designed to protect investors from fraudulent financial reporting by corporations, improving the accuracy and reliability of corporate disclosures.

Corporate Disclosures

Information that a company is required to make public, revealing important financial, operational, or governance details to stakeholders.

NAFTA

The North American Free Trade Agreement, a treaty between the United States, Canada, and Mexico that eliminated most tariffs on trade between them.

Corporate Governance

The system of rules, practices, and processes by which a company is directed and controlled, balancing the interests of stakeholders.