Cross-border joint ventures in a multipolar world: recalibrating globalisation through partnership

Shantanu Jindel

CMS Induslaw, Gurugram

shantanu.jindel@cms-induslaw.com

Shweta Gupta

CMS Induslaw, Gurugram

shweta.gupta@cms-induslaw.com

The late 20th and early 21st centuries were characterised by peak globalisation: falling tariffs, integrated capital markets, harmonising regulations and the rise of multinational enterprises establishing wholly-owned subsidiaries in overseas jurisdictions and pursuing large-scale cross-border acquisitions. Today, the global economy is increasingly multipolar. Strategic rivalry among major powers, revival of industrial policy, supply chain securitisation and expanded foreign investment screening regimes have fundamentally reshaped the calculus of international expansion.

In this environment, cross-border joint ventures (JVs) have reemerged not as transitional vehicles or second-best substitutes for acquisitions, but as a deliberate strategic structure.

In a world marked by geopolitical contestation and regulatory fragmentation, cross-border JVs are enabling enterprises to manage political risk, aligning with local stakeholders and embedding themselves within regional economic blocs. Their renewed importance is best understood in light of the structural transformations driven by globalisation itself and the subsequent recalibration of that process.

From hyper-globalisation to strategic fragmentation

During the peak globalisation era, companies expanded internationally under assumptions of increasing convergence. Trade liberalisation under the World Trade Organization framework, global value chain integration and capital and workforce mobility enabled optimisation of production across borders. Multinationals often preferred full ownership structures, either greenfield subsidiaries or acquisitions, on the premise that control maximised efficiency and protected intellectual property.

However, several developments altered this landscape:

• the resurgence of tariffs and trade disputes between the so-called economic superpowers;
• regional wars impacting supply chains;
• expanded foreign investment screening mechanisms across advanced economies;
• strategic industrial policies in sectors such as semiconductors, renewable energy and telecommunications; and
• sanctions regimes and export controls as tools of geopolitical competition.

The cumulative effect has been a shift from deep global integration toward a model of managed interdependence. Markets remain interconnected, but political and regulatory divergence has widened. It is within this evolving landscape that cross-border JVs have regained strategic prominence.

Market access in a tariff-constrained world

One of the most immediate drivers of JV activity is the re-politicisation of trade. When tariffs, non-tariff barriers and local content requirements increase, exporting becomes less viable. Establishing a wholly owned subsidiary may trigger a national security review or political resistance. A JV with a local partner, by contrast, can provide a pathway to ‘insider’ status. The joint venture between JSW Group and China’s SAIC Motor in India’s automotive sector illustrates this dynamic: by partnering with an established Indian industrial group, the foreign manufacturer was able to embed itself more securely within the domestic regulatory and political environment while preserving access to technology and global supply chains. This also became a necessity given the investment restrictions imposed by the Indian government, which are discussed in the next section.

Consider the European Union, where companies must navigate dense regulatory standards and, in certain sectors, implicit preferences for local participation. A JV structure enables foreign companies to qualify as locally embedded actors, often facilitating access to subsidies, procurement opportunities and tariff-free regional trade.

Thus, in contrast to the globalisation era’s emphasis on global optimisation, the multipolar era prioritises regional anchoring. JVs are well suited to this logic.

Political risk sharing and legitimacy

Multipolarity heightens geopolitical risk. Governments increasingly scrutinise foreign ownership in strategic sectors. Full acquisitions may provoke nationalistic backlash or regulatory delay. A JV can mitigate these concerns by distributing ownership and governance between foreign and domestic partners.

This shared structure has two important effects. First, it reduces exposure for the foreign investor in volatile political environments. Second, it enhances legitimacy in the host state. A domestic partner brings established relationships, regulatory familiarity and cultural insight.

Moreover, in systems characterised by state capitalism or strong industrial policy, alignment with local actors is often indispensable. A JV can signal commitment to national development objectives while preserving foreign participation. The structure thus mediates between economic globalisation and political sovereignty.

In India, the foreign direct investment regime has grown more restrictive in sectors considered strategically sensitive, including defence production and telecommunications infrastructure. In 2020, the government issued Press Note 3, a policy measure requiring prior government approval for any investment originating from, or beneficially owned in, countries that share a land border with India. This change subjected a broad category of inbound investments to heightened scrutiny and formal review, reflecting increased concern over national security and strategic control.

Managing regulatory divergence and technology controls

Globalisation initially encouraged regulatory harmonisation. Today, divergence is more common. Data localisation laws, competition policy variations, export controls and sanctions compliance regimes create a patchwork of legal obligations.

Joint ventures allow companies to compartmentalise operations across jurisdictions. Sensitive technologies can be ring-fenced, intellectual property rights carefully allocated and governance structures tailored to regulatory requirements. Where export controls restrict direct technology transfer, structured collaboration through a JV may offer a legally compliant mechanism for limited cooperation.

Supply chain regionalisation and resilience

Another major shift from the hyper-globalisation era is the prioritisation of resilience over pure efficiency. The Covid-19 pandemic and subsequent geopolitical tensions revealed vulnerabilities in highly optimised global supply chains.

Cross-border JVs facilitate solution and transition. By partnering with companies in strategically aligned jurisdictions, companies can establish regional production hubs that satisfy political expectations while preserving operational flexibility. JVs thus become vehicles for embedding supply chains within preferred geopolitical networks.

Risk allocation and strategic optionality

The multipolar environment is characterised by uncertainty: shifting alliances, regulatory changes and fluctuating trade policies. Under such conditions, flexibility has intrinsic value. Joint ventures provide real options. A JV allows parties to:

• test market viability before committing full capital;
• expand ownership if political and commercial conditions stabilise;
• exit or unwind the partnership if relations deteriorate; and
• share downside exposure during periods of volatility.

Compared to full acquisitions, which are costly and politically visible, JVs offer modularity. This optionality aligns with corporate strategies emphasising adaptability in uncertain environments.

Reinterpreting globalisation through institutional diversity

Importantly, the renewed importance of JVs does not signal the end of globalisation. Rather, it reflects its evolution. Globalisation initially reduced the salience of national borders in economic planning. The current phase reasserts the importance of institutional diversity.

Cross-border JVs embody this adaptation. They recognise that legal systems, political priorities and social expectations differ across jurisdictions. Instead of assuming convergence, they institutionalise co-existence. Governance mechanisms such as board representation, veto rights, deadlock resolution provisions and exit arrangements become tools for managing institutional pluralism.

In this sense, JVs are organisational responses to a world in which economic interdependence persists but political unity does not.

Partnership as geopolitical strategy

In a multipolar world marked by strategic rivalry, regulatory divergence and regionalisation, cross-border JVs have assumed a central strategic role. They enable companies to maintain international presence while adapting to increasingly complex political and regulatory realities. They distribute risk, enhance legitimacy and embed operations within regional economic architectures.

Globalisation once privileged scale, control and integration. The contemporary environment rewards adaptability, alignment and resilience. Cross-border JVs represent a recalibration of global business organisation, one that reconciles continued economic interconnection with renewed geopolitical boundaries.

Far from being relics of earlier developmental stages, JVs have become sophisticated instruments of geopolitical navigation. In the evolving architecture of global commerce, partnership is not merely a compromise. It is strategy.