Which of the Following Is Considered a Negative Effect of Sharing

question 48

Multiple Choice

Which of the following is considered a negative effect of sharing the risks and costs of developing a new business in a joint venture?

• A) The main risk is that there is rarely an established leading company in an emerging industry.
• B) If one partner's skills are more important than the other partner's skills, the partner with more valuable skills may feel they might "give away" profits to the other party because of the 50/50 agreement.
• C) Partners may have different business models or time horizons which can cause conflict about how the business is run.
• D) There is a risk of giving away important, company-specific knowledge to its partner, which might then use it to compete with its other partner in the future.
• E) Conflict can sour the working relationship between the partners and cause the venture to disintegrate.

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Definitions:

Director

An individual appointed or elected to oversee the management and strategic direction of a company or organization.

Due Diligence

Doing everything reasonable to avoid a problem leading to legal liability.

Peat Bog

A type of wetland terrain formed from partially decayed vegetation, known for its unique ecosystems and carbon storage capabilities.

Corporations

Legal entities that are separate from their owners, providing limited liability protection, and able to enter into contracts, sue, and be sued.