The Pros and Cons of Using Joint Ventures as a Tool to Mitigate Political Risks in Developing Countries

Violeta Iftinchi
Gheorghe Hurduzeu
JEL codes: 
F23 - Multinational Firms; International Business, G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill.
As part of their political risk management strategy, multinational corporations (MNCs) can use joint ventures as a tool to reduce their exposure to political risks in international activities. The aim of this article is to present the main benefits for MNCs in using joint ventures with a local partner to mitigate political risks in developing countries and to put forward three risks that MNCs have to consider when choosing the local partner (the risk of opportunistic expropriation, the risk associated with transferring of intellectual property rights and reputational risk).
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