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Contractual Agreements Vs Joint Ventures - Assignment Example

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This research aims to evaluate and present general trends in R&D dependency and reasons for the preference of contractual agreements. Research is done to discover the modes of agreements and their emphasis on R&D during such transformation. …
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Contractual Agreements Vs Joint Ventures
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This paper refers to the R&D programs with inter-firm co-operation. The modes could be either contractual or through joint ventures. The basic objective behind these methods is to ensure cost-economization and strategic intent. R&D implies the standard activity of research oriented development wherein techno-scientific knowledge is applied to create newer procedures and products. The crux is that organizations benefit in the long run through R&D efforts and they need to plan for such activities to foster creation of better processes and products. R&D partnerships form a part of diverse relationships which two unrelated companies entertain through acquisitions or mergers. Different kinds of taxonomies got inter-twined in such understandings and they are now inseparable. The inter-dependency could be charted in any of the following ways of:
• Licensing & cross licensing: The service providers collect fee for the technological enhancement provided to their partner and sometimes swap knowledge instead of fee for cross-licensing.
• Second-sourcing ratifies reproduction of already existing products with specifications.
• Sub-contracting of one firm by the other establishes the customer-supplier relationship usually for long-term contracts.
• Joint funded R&D programs are usually contractual in nature wherein firms co-operate to perform such activities.
• Joint ventures combine the interests of two firms on a profit sharing basis. Sometimes firms with specific objectives related to different functions including R&D stipulate guidelines for performance of those functions smoothly.

This paper refers to the R&D programs with inter-firm co-operation (IV & V points listed above). The modes could be either contractual or through joint ventures. The basic objective behind these methods is to ensure cost-economization and strategic intent. General trends in R&D dependency: The MERIT-CATI list which surveys the trend of R&D dependency establishes the following results: 1960s witnessed a relatively low number of such collaborations with a gradual increase towards the end from 10 a year to 30 a year. 1970’s continued the 30 a year trend and graduated to 50 a year partnerships till the middle only to increase three-folds to around 160 a year by the decade end. 1980s are earmarked for 200 and above inter-firm partnerships in the inception and galloping further to 500 a year till its end. The first two years of 1990s slowed down the pace to 350 to 400 alliances a year but later rose to 700 odd partnerships only to set off again to 500 per year till the end. Though, there is a slowdown in the late 90s, the number of partnerships, however, is far higher than the level of partnerships activated in the early 1960s. These alliances are also circular in nature that when they decrease, they tend to increase cyclically. The notable factor is the number of joint venture (JV) collaborations vis-a-vis contractual agreements in such R&D partnerships. In 1960’s when there were meager number of R&D partnerships, most of them were entered through JV’s. Till the mid of 1970’s around 70% of the total agreements were done through the JV route and 30% of them were through contracts. However, in the early 80’s this range slowed down to 40% giving bigger hand to contractual ...Download file to see next pagesRead More
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