ITPEC IP October 2022 Question 84
Several companies want to collaborate on research and development to develop a new business. Which of the following is an appropriate organization for a new company that is formed through collaborative investment?
Explanation
Joint venture — the partner companies invest jointly to set up a new company that they own and run together.
In a joint venture, each partner contributes capital and often technology, staff or sales channels, and the new company carries out the shared business, here R&D for a new business. The partners stay independent, share the control, the risk and the profits in proportion to their stake, and can combine strengths none of them has alone.
Answer (c)
Why not others:
- •(a) M&A — merger and acquisition combines existing companies or buys control of one; no new jointly funded organization is formed
- •(b) Cross-license — companies license their patents to each other; a contract on intellectual property that creates no organization and needs no investment
- •(d) Spin-off — one company separates a department or business into an independent company; a split, not collaborative investment by several companies
Key rule: Cooperation by contract (licensing, tie-ups) creates no new body; a joint venture is a new company created by joint investment; M&A merges or takes over existing companies.
Business Strategy Management · AI-written, may contain errors
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