778-Som-Lalit Institute Of Business Management - Gujarat ...

The local partners see a joint venture as an attractive mode to profit from the
EIJV partner‘s specific competitive advantages. It is this complementarily of
interest that makes the EIJV appealing especially in markets that are
determined by high industry specific market barriers. Another important
advantage of EIJV is the possible sharing of costs that may be needed for
research and development.
Despite these advantages, EIJV‘s do have some serious drawbacks. A firm
entering a foreign market, through an EIJV, risks giving control of its
technology to his partner. This technology and know-how could be a former
competitive advantage, and may arise the risk of opportunistic behavior by a
joint venture partner, who does not share this knowledge within the JV and
only want to benefit from the others technology as a free-rider.
One more disadvantage of EIJV is objectives of the EIJV partners are
different. It is difficult to reach agreements on how to operate, fund, and
benefit from the venture.
2. Greenfield Entry
In the hierarchical model of market entry modes, the Greenfield entry can be
considered into the high equity based entry modes, because it requires a
major resource assurance in the overseas location (Pan and Tse, 2000). That
recourse promise usually refers to the set up of a new plant, requiring
involvement of capital, human resources and a transfer of the firm‘s know-how
and/or technology. Greenfield entries can be categorized under the term of
wholly owned subsidiaries, where the firm owns 100 percent of the stock.
A wholly owned subsidiary is main two types.
By acquisition (to acquire an established firm), or
By Greenfield entry (the setting up of a new venture).
The common goal behind acquisitions and Greenfield investments is
combination of firm‘s specific advantages with other assets available in the
foreign country. The difference is that a Greenfield entry uses resources of the
investor and combines them with assets acquired locally, whereas an
acquisition uses primarily assets of local firms and combine them with the
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