What is a 'Consortium'

A consortium is a group made up of two or more individuals, companies or governments that work together toward achieving a chosen objective. Entities participating in a consortium will pool resources but otherwise are only responsible to the group in respect to the obligations that are set out in the consortium's agreement. Therefore, every entity that is under the consortium remains independent with regard to their normal business operations and has no say over another member's operations that are not related to the consortium.

Breaking Down 'Consortium'

Consortiums are often found within the non-profit sector, specifically among educational institutions. They often pool resources, such as libraries, research and professors, and share them throughout the members of the group to the benefit of their students. Several groups of North American colleges and universities operate as consortiums. For example, the Five College Consortium in Massachusetts allows the University of Massachusetts Amherst, Mount Holyoke College, Hampshire College, Smith College and Amherst College to pool resources. Students attending any of those institutions can attend classes at any other partnered school for credit at no extra cost. Such educational consortiums generally involve partnerships between institutions in close proximity to one another. Other college consortia include The Quaker Consortium, The Claremont Colleges and the Big Ten Academic Alliance.

Consortiums and For-Profit Businesses

Corporate, for-profit consortiums also exist but they are less prevalent. One of the most famous for-profit consortiums is the airline manufacturer Airbus Industrie GIE, in which European aerospace manufacturers joined to produce and sell commercial aircraft. Illustrating the complexity of such an arrangement, the four partner companies in Airbus (British Aerospace, Aérospatiale, Construcciones Aeronáuticas SA and DASA) were simultaneously subcontractors to and shareholders of the consortium. This resulted in some conflicts of interest and inefficiencies, as well as the eventual shift to Airbus SAS in 2001, which saw a consolidation of the original consortium members and a reduction in overhead.

In the United States, the video streaming service Hulu is a consortium of big media companies, including Comcast, Time Warner, the Walt Disney Co. and 21st Century Fox.

Consortiums and Government

Governments and private enterprise often collaborate to formulate standards for manufacturing, food production, product compatibility, consumer safety and more. In such collaborations, a government leverages its buying power as a consumer to create such standards. Countries that develop standards have a competitive advantage over those that do not, and countries and industries that can agree to a worldwide standard often are leaders in international trade. The creation of standards can lead to potential abuse and antitrust concerns, however. In the United States, legal groundwork for collaborations and consortiums can be found in the Department of Justice and Federal Trade Commission's Antitrust Guidelines for Collaborations Among Competitors.

Consortiums vs. Joint Ventures

While consortiums tend to share resources, they act independently when it comes to day-to-day operations. In a joint venture (JV), two or more parties generally share ownership in a venture, along with risks, profits, losses and governance.

 

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