Weak controls can cost parent companies money and expose them to unexpected risks. The secret to effective governance is balance: sufficient oversight to protect important assets without stifling entrepreneurship. Getting enough time and attention from a few high-level people is often essential for the success of a JV. The leaders of parent companies often think that these people will bring their magic to the company, regardless of formal allocations or incentives. To ensure that these value actors bring their decisive know-how, the JV launch team must immediately identify them and create mechanisms to involve them strongly during the first six to eighteen months of operation. For example, the CEO of a successful U.S. joint venture spent two weeks in Japan during the company`s first month to find local managers who truly understood what it takes to build a world-class manufacturing line in the U.S. Then he convinced the executives to come to the United States for up to a year, where they could have a direct and immediate influence on the layout and operation of the new facility. More than 5,000 joint ventures and many other contractual alliances have been launched worldwide over the past five years. Companies recognize that JVs and alliances can be lucrative vehicles for developing new products, entering new markets, and increasing revenue. The problem is that the success rate of JVs and alliances is at the same level as for mergers and acquisitions – which is not very good. The third challenge facing most joint ventures – and virtually all non-hands-free alliances – is to address the economic interdependencies between corporate companies and the JV.

To avoid double cost, most alliances are structured in such a way that parents continuously provide capital, human capacity, material resources, marketing and other services. And during the start-up phase, they agreed on specific ground rules to fairly compensate each parent for their contributions. . . .