Chapter 2

Question 1

Institutions:

Answer 1

Formal and informal rules of the game

Question 2

Institutional framework:

Answer 2

Formal and informal institutions governing individual and firm behaviour

Question 3

Institution-based view:

Answer 3

A theoretical perspective suggesting that firm performance is, at least in
part, determined by the institutional frameworks governing firms

Question 4

Transaction costs:

Answer 4

The costs of organizing economic transactions

Question 5

Informal institutions:

Answer 5

Rules that are not formalised but exist in, for example, norms, values and ethics

Question 6

Formal institutions:

Answer 6

Institutions represented by laws, regulation and rules

Question 7

Cognitive pillar:

Answer 7

Institutiona influence behavior through deeply internaliseds belifes and assumpions that feel “natural” or “obvious”

Question 8

Normative pillar:

Answer 8

Instututions influence behaviour through social values, norms, and expectations

Question 9

Regulatory pillar:

Answer 9

Institutions influence behaviour through rules, laws, and formal sanctions

Question 10

Opportunist behaviour:

Answer 10

Seeking self-interest with guile

Question 11

Institutional transition:

Answer 11

Fundamental and comprehensive changes introduced t the formal and
informal rules of the game that affect organizations as players

Question 12

Institution-based view
Proposition 1

Answer 12

Managers and firms rationally pursue their interest and make choices within the formal and informal constraints in a given institutional framework

Question 13

Institution-based view
Proposition 2

Answer 13

Although formal and informal institutions combine to govern firm behaviour, in situations where formal constrains are unclear or fail, informal constraints will play a larger role in reducing uncertainty and providing constancy to managers and firms

Question 14

Political system:

Answer 14

A system of the rules of the game on how a country is governed politically

Question 15

Democracy:

Answer 15

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

Question 16

Proportional representation:

Answer 16

Election system that allocated seats in parliament in proportion to
the votes received by each party (usually subject to minimum threshold)

Question 17

First-past-the-post system:

Answer 17

Election system by which in each constituency the candidate with
the relative majority of votes gets the seat

Question 18

Authoritarianism:

Answer 18

A political system in which power is concentrated in the hands of one person
or a small elite

Question 19

Lobbying:

Answer 19

Making you views known to decision makers with the aim to influence political
processes

Question 20

Corruption:

Answer 20

The abuse of public power for private benefits

Question 21

Non-market strategy:

Answer 21

Political and social activities aimed at influencing the rules set in their host countries

Question 22

Political risk:

Answer 22

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

Question 23

Economic system:

Answer 23

Rules of the game on how a country is governed economically

Question 24

Market economy:

Answer 24

An economy that is characterised by the ‘invisible hand’ of market forces

Question 25

Command economy:

Answer 25

An economy in which all factors of production are government- or state- owned and controlled, and all supply, demand and pricing are planned by the government

Question 26

Varieties of capitalism:

Answer 26

A scholarly view suggesting that economies have different inherent logics on how markets and other mechanisms coordinate economic activity Varieties: => Liberal market economy => Coordinated market economy

Question 27

Liberal market economy (LME):

Answer 27

A system of coordination primary through market signals => companies are predominantly financed through the stock market, while labour markets are highly flexible

Question 28

Coordinated market economy (CME):

Answer 28

A system of coordinating through a variety of other means in addition to market signals => collaborations between firms, units, and governments play a bigger role

Question 29

Apprenticeship system:

Answer 29

Vocational training system for crafts and professions

Question 30

Legal system:

Answer 30

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

Question 31

Civil law:

Answer 31

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

Question 32

Common law:

Answer 32

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

Question 33

Case law:

Answer 33

Rules of law that have been created by precedents of cases in court

Question 34

Legal certainty:

Answer 34

Clarity over the relevant rules applying to a particular situation

Question 35

Property rights:

Answer 35

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

Question 36

Intellectual property rights (IPRs):

Answer 36

Rights associated with the ownership of intellectual property

Question 37

Patents:

Answer 37

Legal rights awarded by government authorities to investors of new technological ideas, who are given exclusive (monopoly) rights to derive income from such inventions

Question 38

Copyrights:

Answer 38

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

Question 38

Trademarks:

Answer 38

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

Question 39

Corporate governance:

Answer 39

Rules by which shareholders and other interested parties control corporate decision-makers