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Business Policy & Strategy > Government and Business > Flashcards

Government and Business Flashcards

1
Q

What are Institutions?

A

Taken-for-granted rules, norms, and standards

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2
Q

What are Formal Institutions?

A

explicit and codified (e.g. laws)

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3
Q

What are Informal Institutions?

A

shared understanding (e.g. acceptable practices and culture)

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4
Q

Institutions enable and constrain firms’ behavior

A

true

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5
Q

Conformance is needed for firms’ legitimacy

A

true

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6
Q

Describe origins of institutions

A
  1. Institutions solve problems; often, they come to reflect the preferences of powerful and influential people
  2. Formal institutions result from informal institutions and historical circumstances
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7
Q

Describe why governments are important

A
  1. Establish and oversee the rules of the game (acceptable and unacceptable behavior in business)
  2. Influence the returns to investment and innovation
  3. Shape the process for influencing government officials
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8
Q

List benefits of government

A
  1. Establish order and prevent abuses
  2. Accomplish large-scale goals that private individuals and organizations cannot or will not
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9
Q

List the costs of government

A
  1. Expensive; tends to grow, rarely shrinks
  2. Reflects the private interests of people in government
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10
Q

What are regulatory institutions?

A

Laws that specify what individuals and firms are allowed and required to do. The enactment, execution, and enforcement of regulations sometimes diverge.

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11
Q

List advantages of Regulatory Institutions

A
  1. Establish frameworks that affect how firms are founded, compete, and cooperate
  2. Prevent private interests from harming the public good
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12
Q

List the disadvantages of Regulatory Institutions

A
  1. Can be used to protect private interests
  2. Can erect barriers to innovation and entrepreneurship
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13
Q

What are Political Institutions?

A
  1. Procedures for changing institutions
  2. Define the processes through which individuals and organizations influence government officials
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14
Q

List advantages of Political Institutions

A
  1. Specify who can serve in government and how
  2. Can enable change, adaptation, and flexibility
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15
Q

List the disadvantages of Political Institutions

A
  1. Can lock certain groups out of the political process
  2. May enable and legitimize corruption
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16
Q

Define Economic Institutions

A
  1. Primarily relates to fiscal (e.g., government spending) and monetary (e.g., the money supply) policies
  2. Influence and oversee a country’s economic system, especially its capital markets; affect the value of currency
17
Q

List advantages of Economic Institutions

A
  1. Intended to promote stability and reduce uncertainty
  2. May smooth the natural cycles in market conditions
18
Q

List disadvantages of Economic Institutions

A
  1. Interfere with natural market processes
  2. Complex; their effects are difficult to predict
19
Q

Describe State Funding

A
  1. Government provides money to organizations
  2. Grants, loans, contracts, and taxes (e.g. tax credits)
20
Q

List Advantages of State Funding

A
  1. Often fuels new knowledge and innovation, especially for expensive innovation projects that fit government agendas
  2. Can promote human and social capital, venture formation, job creation, and growth
21
Q

List Disadvantages of State Funding

A
  1. May crowd out private-sector; can hurt non-funded firms; funded firms may use the funding for other purposes
  2. Government has difficulty picking winners; political conditions may divert funds from the best investments
22
Q

Define Intellectual Property Protection

A
  1. Specifies the ownership and control of knowledge (e.g.., through patents, copyrights, and trademarks)
  2. Enforces claims on profits generated by the knowledge
23
Q

List advantages of Intellectual Property Protection

A

1.Incentivizes investments in innovation; improves value capture; rewards disclosure
2. Provides order for innovation process; discourages counterfeiting; promotes collaboration and technology sharing

24
Q

List Disadvantages of Intellectual Property Protection

A
  1. Creates monopolies, perhaps discouraging innovation; limits knowledge diffusion and extension
  2. Complex and costly enforcement; incentivizes time-consuming, costly, and destructive patent wars
25
Q

What are Trade Barriers?

A
  1. Government may encourage or prohibit exchanges with governments or firms in other countries
  2. Tariffs: taxes on foreign goods entering a country
  3. Embargos: Laws that prohibit economic exchange with certain countries (import & export restrictions)
26
Q

What are Labor Laws?

A
  1. They concern wages, benefits, severance, union protections, etc.
  2. Can include worker leave, safety, and termination provisions
27
Q

List the advantages of labor laws

A
  1. Can protect workers from exploitation
  2. Can promote stability and leveraging of human capital
28
Q

List the disadvantages of labor laws

A
  1. May reduce firms’ flexibility to respond to changing conditions and discourage worker performance
  2. May increase unemployment, lower innovation and efficiency, and reduce economic growth
29
Q

Describe Shaping Institutions

A

Nonmarket strategy: using government as an instrument of competition

30
Q

List approaches for Manipulating Institutions

A
  1. Activism: affecting public and political opinion (e.g. through public relations campaigns and protests)
  2. Lawsuits: using the judicial system to affect the law
  3. Lobbying: influencing and sharing information with public officials (lobbyists often represent special interests)
  4. Political campaigns: actions to affect elections
  5. Institutional entrepreneurship: attempts to enact or build support for new norms, rules, and standards
31
Q

Institutions come to reflect the preferences of those who are the most effective in these efforts

A

true

Business Policy & Strategy (31 decks)

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