Hungry for joint ventures, Soviets enjoy working with small companies, Minnesota businessman says

David Fettig | Managing Editor

Published September 1, 1990  | September 1990 issue

So starved are the Soviets for joint venture opportunities that when James Johnson of Minnesota's Amador Corp. visits his partners in Moscow, their meetings are frequently interrupted by deal-making government officials.

Typically, while Johnson and about a dozen of his Moscow counterparts are gathered to work on their business, the meeting will stop and— completely unannounced—a Soviet official will walk in with a proposal for a new joint venture.

Some may call that perestroika, but Johnson calls it entrepreneurism.

"Entrepreneurism is a genetic thing and not a cultural thing," Johnson says, explaining the Soviets' desire for enterprise despite over 70 years of state-controlled economics. He called the Soviets "aggressive" and described them as "risk-takers."

The same words might be used to describe Johnson, the chief executive officer of the six-year-old Amador Corp. The $3 million company, which is based in Taylors Falls, is a spin-off from Control Data that tests computers and other electrical equipment to ensure that they don't produce illegal electromagnetic interference. Federal standards limit the amount of interference that can be emitted, for example, from computers, which contain oscillators that produce electromagnetic signals similar to radio waves.

Two years ago, at an international trade meeting in Brazil, Johnson was introduced to Soviet officials with similar business interests. Johnson's last words to the Soviets were, "Let's do a joint venture."

That was in August 1988; by January of the following year an Amador employee was in Moscow. Johnson followed two months later and after about a year of negotiations (including six total trips by Amador to Moscow and one trip by the Soviets to Minnesota), Amador and the Soviets had agreed on a joint venture. (Amador's Soviet partners eventually made three additional trips.)

"It was an extremely time-consuming and rather expensive process," Johnson says, but he quickly adds that it wasn't as difficult or expensive as "conventional wisdom" may assume. Amador was able to hold the line on expenses by using local attorneys, rather than its $320/hour attorneys in Washington, D.C. The growing presence of Minnesota attorneys who are knowledgeable in the matters of international trade—and who are largely more affordable than their eastern peers—is the single biggest reason Amador could afford the Soviet venture, Johnson says.

Also, the company traveled as cheaply as possible, which meant flying economy class and working deals with the Soviets. In Amador's case, company officials visiting in Moscow had their hotel fees paid by their Soviet partners—in rubles—and Amador returned the favor when the Soviets visited. In Moscow, a hotel room that costs about 50 rubles a night would require nearly $200—a rate that is out of synch with the ruble's international worth.

Johnson offers his stories of Moscow deal-making as insight for small Upper Midwest companies with a desire to establish partnerships with the Soviets. And he does not hesitate to encourage businesses to make such a move: "I think we're making a real mistake by not literally getting on a plane and going on over there."

He makes that claim not only on the basis of the Soviets' eagerness for joint ventures, but also because the Soviets have a vast amount of untapped technological research. "The United States, and Minnesota in particular, has an almost singular opportunity right now to get on over there and exploit—and I use that in the full sense of the term—that technology that is literally just sitting there. I'm not just talking about pure physics, here. I'm talking about the area of applied research," Johnson says.

Not only is technology "just sitting there," but so is consumer demand. Johnson recalls that a Soviet visitor once told him that there is such pent-up demand for consumer goods that manufacturers are being warned to "produce consumer goods, consumer goods, consumer goods. You know, before they have a revolution on their hands."

And the market is wide open, according to Johnson. The Soviets' propensity for consumer goods is resulting in some peculiar joint ventures: the Soviet Institute for Computers and Infomatics recently started a joint venture with an American building materials firm; the Ministry of Aviation signed a deal with a company to make fishing lures; and Johnson says that a recent Soviet visitor from another computer-related institute, with 150,000 square meters of plant and 13,000 employees, is looking for joint venture opportunities of any kind.

The size of those Soviet institutes should not be daunting to small- and mid-size businesses, however, according to Johnson. To the contrary, he suggests that small companies—which are perceived as quicker to make and implement decisions—are generally favored by the Soviets for joint ventures.

"The Soviets most assuredly and certainly like to work with smaller companies. They always seem in a hurry, even though things move very slowly over there, and they want decisions made very, very rapidly," Johnson says.

In Amador's case, its Soviet joint venture will bear the name Samtes, and will be owned on a 50-50 basis. Eventually Samtes will have a capitalization of about $1.6 million, half of which will come from Amador, primarily in the form of equipment and technological know-how. Samtes will be located outside the city of Obninsk, about 80 miles southeast of Moscow, and should begin operation this fall.

Johnson says he doesn't bring any particular expertise to the world of international business, other than a desire to investigate all possible markets for his company. He worked for three years at Bemis, preceded by 16 years at 3M, prior to buying Amador in 1984. Much of Amador's business is with foreign customers, and some of his staff is bilingual.

Johnson recommends that companies "do their homework" before negotiating with a particular country or foreign company, and that they hire good lawyers and interpreters in order to feel comfortable about transacting business.

And Johnson believes companies better become comfortable with foreign markets, because if they don't they will be left behind as the Germans, Finns, Japanese, French and others gain a permanent foothold in the developing market economies of Eastern Europe and Russia.

"Every business, even a tiny business like ours, is a global business. And you cannot survive, yet alone grow, if you're just going to think of yourself as a Minnesota-based company."