Cooperative Contractual Arrangements
Cooperative contractual agreements are business relationships in which a domestic firm gains access to global markets without making the large financial or technical investments often required to establish exporting links or wholly owned subsidiaries located on foreign soil. Instead of producing products or services, either domestically or abroad for overseas sales, firms contract the right to produce directly to foreigners. Firms obtain income directly by providing resources, technology, expertise, trade names, or business designs to foreign producers. The foreign enterprise then owns and operates the business activity. Thus, while the originating firm establishes a presence in the global marketplace, that presence is usually quite modest, involving neither ownership nor control of the foreign operation.
One of the primary methods of participating in new markets through cooperative contractual means is by licensing the firm's products, services, or technology to another company. Under this arrangement, the firm sells a limited right to produce and market the product in return for royalty