Ch 2 - Understanding Formal Institutions

Question 1

institutional transitions

Answer 1

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

Question 2

institution-based view

Answer 2

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

Question 3

institutions

Answer 3

Formal and informal rules of the game.

Question 5

formal institutions

Answer 5

Institution represented by laws, regulations, and rules.

Question 6

regulatory pillar

Answer 6

The coercive power of governments.

Question 7

informal institutions

Answer 7

Institution represented by cultures, ethics, and norms.

Question 8

normative pillar

Answer 8

The mechanism through which norms influence individual and firm behavior.

Question 9

norms

Answer 9

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

Question 10

cognitive pillar

Answer 10

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

Question 11

transaction costs

Answer 11

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

Question 12

opportunism

Answer 12

The act of seeking self-interest with guile.

Question 13

transition economies

Answer 13

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

Question 14

bounded rationality

Answer 14

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

Question 15

political system

Answer 15

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

Question 16

democracy

Answer 16

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

Question 17

totalitarianism or dictatorship

Answer 17

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

Question 18

political risk

Answer 18

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

Question 19

legal system

Answer 19

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

Question 20

civil law

Answer 20

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

Question 21

common law

Answer 21

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

Question 22

theocratic law

Answer 22

A legal system based on religious teachings.

Question 23

property rights

Answer 23

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

Question 24

intellectual property (IP)

Answer 24

Intangible property that is the result of intellectual activity.

Question 25

intellectual property rights (IPR)

Answer 25

Rights associated with the ownership of intellectual property.

Question 26

patents

Answer 26

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

Question 27

copyrights

Answer 27

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

Question 28

trademarks

Answer 28

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

Question 29

piracy

Answer 29

Unauthorized use of intellectual property.

Question 30

economic system

Answer 30

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

Question 31

market economy

Answer 31

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

Question 32

command economy

Answer 32

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

Question 33

mixed economy

Answer 33

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

Question 34

state-owned enterprises (SOEs)

Answer 34

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

Question 35

Washington Consensus

Answer 35

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 U. S. government and two Washington-based international organisations: the International Monetary Fund and the World Bank.

Question 36

moral hazard

Answer 36

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

Question 37

Beijing Consensus

Answer 37

A view that questions Washington Consensus' 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 38

institutional transition

Answer 38

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

Question 39

institutional framework

Answer 39

Formal and informal institutions that govern' individual and firm behavior.