Any investment cooperation, first of all, provides for mutual financial benefits, not only personal but also national. Check the best way to govern a collaborative organization in the article below.

The Connection Between Corporate Governance and Collaborative Organization

Setting up a joint venture abroad is a relatively new way of doing business with a foreign counterparty. When one of the business participants is a foreigner, this creates additional difficulties. The question arises of how to manage a common cause, and how to distribute risks and profits. The creation of a common enterprise is one of the ways to effectively resolve all these difficult issues, to resolve them for mutual benefit.

Unlike enterprises with 100% foreign capital, there is no meeting of participants in joint ventures. Instead, the supreme governing body in a joint unit enterprise is the board of directors, and in a joint cooperative enterprise – the board of directors (if the enterprise is a legal entity) or the joint management committee (if the enterprise does not acquire the status of a legal entity).

Characteristic features of the collaborative organization are:

  1. joint ownership, joint resources, joint profit;
  2. risk management and distribution are also joint;
  3. fixed assets are located in the domestic territory but belong to all parties to the joint venture.

Corporate governance has become one of the main priorities of the leaders of public companies, which cannot be said about the management of joint ventures. But in them, according to the top managers themselves, the systems and procedures of corporate governance are not at all as good as those of their founders. For example, joint ventures rarely have standard planning and control procedures in place for the core business, and the parent companies usually do not pay due attention to this.

How to Run a Collaborative Organization?

You can create a collaborative organization by concluding one agreement on joint activities (that is, creating a simple partnership) or several complex agreements (agency, guarantee agreements, commissions, mixed contracts). Another option is to register a separate legal entity. The second method is chosen much more often in practice since it is the simplest and most effective.

Collaborative organization can serve a variety of purposes. If it is evaluated by the state where the production or office of the company will be based, the goals of the enterprise are as follows:

  • the emergence of new goods and services on the market;
  • the attraction of innovations, technologies, and managerial experience;
  • creation of additional resources;
  • attracting investors.

Collaborative organization, being one of the forms of doing business, despite the sanctions and the tense political situation on the world stage, continues to be popular in the world. Foreign investors actively invest their money, knowledge, and experience in domestic business, and open various companies and enterprises in various sectors of the economy together with partners. There are many reasons for this, the main ones being access to new commercial markets and the ability to produce new types of goods and services.

The idea behind this management style is to allow managers to combine their own strengths with those of other team members, allowing them to collectively compensate for any shortcomings that may be found among team members. Theoretically, this approach should improve the efficiency of all operations within the company and, in turn, have a positive impact on employee morale, supplier relationships, and even consumer perceptions of the business.