Risk-Sharing Partnerships With Suppliers: The Case Of Embraer

Investing in new product development is a strategic option for companies that want to adapt to constant changes in customer preferences, anticipate new product releases of rival companies and/or respond to them, make use of technological opportunities and increase market share. This investment can be undertaken directly, through R&D, licensing of technologies or copying; however, there are other means to develop products based on cooperation between companies in the production chain, through partnerships.Since the mid 1990s, the global aircraft industry has been creating new solutions for product development. Risk-sharing partnerships with suppliers began to be established in an attempt to reduce investments and, consequentially, the dependence on loans. Companies focused their development and manufacturing activities on specific and strategically interesting areas. The partners began not only to invest in tooling, engineering and infrastructure, but also to participate more directly in the projects, in the investments and design activities, acquiring rights to future sales income of products. This contractual modality, called risk-sharing partnership, is the focus of this study.Specifically, this article analyzes the risk-sharing partnerships made by Embraer during projects for the ERJ-170/190 aircraft group. It also aims to justify these partnerships, considering the current global aircraft market conditions, evaluating the critical success factors, requirements and macro-economic conditions which supported the adoption of this new policy. Embraer is frequently studied and quoted as a successful example of a Brazilian business enterprise. This analysis may be a starting point to evaluate whether the business partnership model is useful to improve performance of Brazilian firms belonging to other industrial segments.