Complexities of International Business Transactions

2826 Words11 Pages
Complexities of International Business Transactions The complexities of creating a contract between two parties (or among three or more parties) is nearly always complicated as each side negotiates for what it considers to be the best deal that it can get while not at the same time provoking the other party to back out of the deal. This task is made even harder because it is almost never the case that the different parties to a potential contract rarely have the same valuation of the services or products in play because the sides have fundamentally different underlying values and economic restrictions. This last condition especially, but in fact all of the conditions that surround the creation of and agreement upon a contract are infinitely more difficult to negotiate once cultural differences and economic and political friction enter the mix. This paper examines a particular corner of international trade: The difference between formal and relational contracting with Asian trading partners along with some of the ancillary issues such as transactional cost analysis as performed by Williamson (1981). This paper focuses on the ways in which formal contracting processes are often far less important than relational ones, even in cases where it might be predicted that formal contracts would work out to the betterment of all sides. What assumptions about the value of formal contracts tend to leave out, however, is the ways in which cultural norms and expectations create
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