Financial Effects of Globalization
Global partnerships are developed in order to capture a number of different benefits. The partners will typically each bring assets that the other partners need -- skills, resources, competencies or even things like market access. The partnership therefore works when the partners have mutually beneficial assets that they can contribute to the partnership. The partnership therefore has a lower cost, or greater potential benefits, than would be achievable if either party pursued the opportunity alone.
Financially, the partnership thus usually offers either a higher revenue ceiling, lower profits, or both. If the partners did not believe this to be the case, they would not enter into a partnership, because there are costs that are associated with running a partnership that might not exist otherwise. The financial benefits therefore are going to be greater -- or the partners believe that they will be greater -- than the cost of the partnership.
There are, of course, limitations to partnerships. In the general sense, a partnership will be limited in terms of opportunity. The key to the partnership is that by working together, the parties expand their opportunity, but the expansion of opportunity is not infinite -- there are still constraints. For example,...
While some constraints are natural, others are built into the text of a partnership agreement. The parties agree on the extent of the partnership, the roles, and the disposition of rewards gained from the partnership. Many such partnership agreements contain extensive dispute resolution mechanisms because of the difficulty in interpreting the precise nature of the partnership. The agreement itself will therefore provide many of the constraints to an agreement. Using NAFTA as an example, not all goods were covered under the agreement, and others were not fully covered. Thus, there are constraints to free trade within NAFTA that would require a subsequent addendum to the agreement in order that those constraints be removed.
Partnerships can impact not only those parties that sign the partnership agreement, but other stakeholders as well. As an example of this, non-profit organizations are often not party to international partnership agreements that are utilized by corporations and governments, but their operations might change as the result of those agreements. Governments themselves alter…
