Project-based collaborations refer to ventures in which focal firms team up through a project with a precise definition of time and a relatively narrow scope, without developing new legal entity (Cavusgil, Gary, John, Hussain and Elizabeth 73). Conversely, equity joint venture refers to partnership in which two or more parent firms create a separate firm through pooling of assets so that they can gain joint ownership of the new legal entity. Firms use this approach to expand into a country (Cavusgil, et al. 73). The key differences between the two types of ventures include the following.

First, in project-based collaboration, there is no new legal entity created. Focal firms in a project-based collaboration operate on a contractual agreement rather than creating a legal entity (Cavusgil, et al. 73). Guidelines within the contract signed by the firms involved helping them to carry on their activity. On the other hand, with equity joint ventures, there is the creation of a new legal entity. The rights and responsibilities given to the legal entity are enforceable through the judicial system. Focal firms have the legal capacity to enter into contracts, sue and be sued, held accountable and incur and pay debts. Therefore, partnerships in equity joint ventures have the right to own property and trade.

Second, in project-based collaborations, parent firms do not necessarily seek interest in owning the ongoing business. Focal firms contribute to the ongoing enterprise by pooling their monetary resources, expertise and personnel to perform mutual beneficial tasks that include marketing or research and development (Cavusgil, et al. 73). Parent firms perform such activities to access related benefits, but they do not invest equity in creating a new enterprise. Moreover, the interest of firms in project-based collaboration is to take advantage of the partners’ respective strengths and share the immense fixed costs involved in research and development projects. Conversely, parent firms in equity joint ventures invest equity and seek to own a new legal entity. The common goal of the focal firms is to own the new enterprise, and this is what drives the joint venture (Shishido, Munetaka and Masato 204). By owning the new legal entity, partners have greater control over future directions.

Third, projects-based collaborations have a clear definition of time. Collaborations under this venture do not last indefinitely. Partners tend to have a well-outlined timetable that guides them. Moreover, there is an end date to the collaboration. By pooling resources, personnel, and capabilities, partners continue to collaborate until the business is successful or until they consider it invaluable to collaborate (Shishido, Munetaka and Masato 204). Partners separate after the objectives have been met. On the other hand, equity joint ventures do not have a well-defined timetable. Partnership in this venture lasts indefinitely. The partnership relationship is a long-term orientation. Besides, the time to rectify faults in this venture is an ongoing process. Parent firms have time to understand the local environment and select appropriate potential partners. Due to the complex management structure, it is hard to terminate equity joint ventures although the agreement has the time period of the venture.

Fourth, project-based collaborations have a narrow scope of venture. The nature of collaboration revolves around manufacturing, new products, sourcing, one or more research and development project or distribution. Partners in this venture collaborate to develop new technologies or share know-how with each other thus catching up with rivals (Shishido, Munetaka and Masato 204). Since the venture has a narrower scope, partners can respond quickly to the dynamic technology and market conditions. Conversely, the nature of equity joint ventures is broader in scope. Firms pool assets to pursue long-term strategic goals and gain economies of scale.

Works Cited

Cavusgil, S. Tamer, Gary Knight, John R. Riesenberger, Hussain G. Rammal, and Elizabeth L. Rose. International business. Pearson Australia, 2014. Print.

Shishido, Zenichi, Munetaka Fukuda, and Masato Umetani. Joint Venture Strategies: Design, Bargaining, and the Law. Cheltenham: Edward Elgar Publisher, 2015. Print.

 
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