Paper long abstract:

The concept of a commercial partnership is deeply rooted in the Middle Ages. One of the oldest business organization forms is business partnerships established between the Mongol ruling class and their merchant partners, known as ortoq. Historical sources are extremely fragmented for economic historians. Therefore, this topic requires a scholar to master several languages, such as Mongolian, Chinese, Latin, Turkic and Persian in order to use primary sources. Until now, the comprehensive analysis of this ancient business organization is missing. This study aims to reconstruct the structural features of Mongol-ortoq partnership based on primary sources and academic literatures. Moreover, this study analyzes business activities undertaken by the ortoqs.

The three basic activities carried out by the ortoqs included principal-authorized purchase of rarities, reselling of purchased goods, and lending money using the capital advanced by the ruling class of Mongol Eurasia. In the first form of the three activities, a principal advanced capital to an ortoq with instructions to purchase or to sell pre-identified goods in selected destinations. The ortoq carried out commercial activities with the capital provided and shared profit with the principal at a pre-determined ratio. Due to lack of the primary sources, numerical variations for the profit-sharing ratio are unknown to date except for two ratios applied to the capital funded by the khan's treasury.

This study argues that the Mongol-ortoq partnership had several characteristics of other medieval trade contracts such as mudharaba or commenda. As analogy to the modern concept of limited liability, the principal was liable to all the losses up to the limit of the original investment whereas an ortoq was not liable to the lost capital. As the Mongol rulers and nobles suffered more losses over time, loan capital became dominant over the capital structure of Mongol-ortoq partnerships. When a principal lent money to an ortoq, most business risks were shifted from the former to the latter. In such a case the ortoqs became unlimitedly liable to loan capital used for the venture. The reason for this shift is not clearly known. However, in light of a large number of failures of the Mongols, credit had become the predominant form of capital used for commercial partnerships by the late thirteenth century. In the wake of the Eurasian social and political crisis, the ortoq system did not survive and disappeared by the fifteenth century.