Chapter 2

Question 1

Beijing Consensus,

Answer 1

A view that questions Washington Consensus’s belief in the superiority of private ownership over state ownership in economic policy making, which is often associated with the position held by the Chinese government.

Question 2

Bounded rationality

Answer 2

The necessity of making rational decisions in the absence of complete information.

Question 3

Civil law

Answer 3

A legal tradition that uses comprehensive statutes and codes as a primary means to form legal judgments.

Question 4

Cognitive pillar

Answer 4

The internalized (or taken-forgranted) values and beliefs that guide individual and firm behavior.

Question 5

Command economy

Answer 5

An economy that is characterized by government ownership and control of factors of production.

Question 6

Common law

Answer 6

A legal tradition that is shaped by precedents and traditions from previous judicial decisions.

Question 7

Copyright

Answer 7

Exclusive legal rights of authors and publishers to publish and disseminate their work.

Question 8

Democracy

Answer 8

A political system in which citizens elect representatives to govern the country on their behalf.

Question 9

Economic system

Answer 9

Rules of the game on how a country is governed economically.

Question 10

Formal institution

Answer 10

Institution represented by laws, regulations, and rules.

Question 11

Institution-based view

Answer 11

A leading perspective in global business that suggests that the success and failure of firms are enabled and constrained by institutions.

Question 12

Institutional framework

Answer 12

Formal and informal institutions that govern individual and firm behavior

Question 13

Institutional transition

Answer 13

Fundamental and comprehensive changes introduced to the formal and informal rules of the game that affect firms as players.

Question 14

Institution

Answer 14

Formal and informal rules of the game.

Question 15

Intellectual property (IP)

Answer 15

Intangible property that is the result of intellectual activity.

Question 16

Intellectual property right (IPR)

Answer 16

Right associated with the ownership of intellectual property.

Question 17

Legal system

Answer 17

The rules of the game on how a country’s laws are enacted and enforced.

Question 18

Market economy

Answer 18

An economy that is characterized by the “invisible hand” of market forces.

Question 19

Mixed economy

Answer 19

An economy that has elements of both a market economy and a command economy.

Question 20

Moral hazard

Answer 20

Recklessness when people and organizations (including firms and governments) do not have to face the full consequences of their actions.

Question 21

Normative pillar

Answer 21

The mechanism through which norms influence individual and firm behavior.

Question 22

Norms

Answer 22

Values, beliefs, and actions of relevant players that influence the focal individuals and firms.

Question 23

Opportunism

Answer 23

The act of seeking self-interest with guile.

Question 24

Patent

Answer 24

Exclusive legal rights of inventors of new products or processes to derive income from such inventions.

Question 25

Piracy

Answer 25

Unauthorized use of intellectual property.

Question 26

Political risk

Answer 26

Risk associated with political changes that may negatively impact domestic and foreign firms.

Question 27

Political system

Answer 27

The rules of the game on how a country is governed politically.

Question 28

Property right

Answer 28

The legal right to use an economic property (resource) and to derive income and benefits from it.

Question 29

Regulatory pillar

Answer 29

The coercive power of governments.

Question 30

State-owned enterprise (SOE)

Answer 30

A firm owned and controlled by the state (government).

Question 31

Theocratic law

Answer 31

A legal system based on religious teachings.

Question 32

Totalitarianism (dictatorship)

Answer 32

A political system in which one person or party exercises absolute political control over the population.

Question 33

Trademark

Answer 33

Exclusive legal rights of firms to use specific names, brands, and designs to differentiate their products from others.

Question 34

Transaction cost

Answer 34

The cost associated with economic transactions or, more broadly, the costs of doing business.

Question 35

Transition economies

Answer 35

A subset of emerging economies, particularly those moving from central planning to market competition (such as China, Poland, Russia, and Vietnam).

Question 36

Washington Consensus

Answer 36

A view centered on the unquestioned belief in the superiority of private ownership over state ownership in economic policy making, which is often spearheaded by the US government and two Washington-based international organizations: the IMF and the World Bank.