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Joint venturing (JV) is a useful concept to be employed by
constructors for reducing construction risks and acquiring
technology and know-how external to their organization. This
concept is particularly critical, as the construction project in
consideration is both large-scale and technically complicated.
Constructors of different business scales and with diverse areas
of technical capability can form a project-based team for
meeting the client''s needs, while each participating firm can
produce reasonable profit for himself and others and perhaps
establish a new specialty.In this study, it is argued that the
key bottleneck for JV among constructors is the lack of a
systematic means for sharing construction risks which may or may
not be rationally evaluated among partners. A crucial index for
examining the risk-sharing behavior is the share of capital
earmarked by each partner for the project. Clearly, the higher
the share, the more sensitive to the gain or loss of the
partnering. If the share of each partner can be rationally
justified against his tolerance to loss and the distribution of
the projected return, it may be possible for the entire team to
act more towards the common goal, without the cost of moral
hazard among partners.This study incorporates the idea of
utility to represent a constructor''s risk attitude and
preference towards riskdecisions. By characterizing the JV
models, various partnering strategies are simulated. The major
finding of this study is that JV can be a profitable strategy,
regardless the constructor''s ability to contract the entire
project. Also, for the JV team to form with ease, a rule of
thumb is that the partners need to have highly diverse risk
attitudes and a consensus on the distribution of projected
return.
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