Divina Pharma Inc.and MF Electronics Inc.have together invested and created a new organization, FirstHealth Inc., to focus on developing diagnostic devices.Through this new firm, both companies are attempting to combine their core competencies to innovate and reduce their risks associated with transaction-specific investments.However, the new organization operates independent of Divina Pharma and MF Electronics.Which of the following alternatives to integration does this scenario best illustrate?

Question

Quizplus · Accepted Answer

The scenario best illustrates a joint venture. In a joint venture, which is another special form of strategic alliance, two or more partners create and jointly own a new organization. Since the partners contribute equity to a joint venture, they make a long-term commitment, which in turn facilitates transaction-specific investments.