Competency 2 Flashcards
(19 cards)
In global business, define Institution.
The rules of the game that govern individuals’ and firms’ behavior.
How do institutions reduce uncertainty?
They signal which actions are legitimate and which are not.
What is a Formal & Informal Institution?
Formal: Laws, rules, & regulations that focus on political, legal, & economic systems.
Informal: Norms, culture, & ethics.
What are the 3 Pillars supporting Institutions?
Regulatory Pillar (Formal): Coercive power of government; i.e., contracts you write.
Normative Pillar (Informal): Values, beliefs, and actions of other players influence individuals & firms; i.e., Different in other countries.
Cognitive Pillar (Informal): Internalized, beliefs & values taken for granted that guides behavior; i.e., whistleblowers
What are the two core propositions of the institution-based view?
- Managers & Firms pursue interests within formal and informal constraints (bounded rationality).
- When formal constraints (rules) are unclear or fail, informal constraints play a larger role in reducing uncertainty and providing constancy to firms & individuals.
What are the 2 Main Political Systems (1 of the formal institutions)?
Democracy: Citizens elect representatives to govern the country; emphasize freedom of expression & organization (is highly recognized & the laws are transparent).
Totalitarianism: One person/ party holds absolute political power to govern the country.
What are the four types of Totalitarian Regimes?
- Communist (focus on communist (one) party)
- Right-Wing (military-backed, anti-communist)
- Theocratic (religious led party)
- Tribal (one ethnic group/tribe monopolizing power)
What is Political Risk & provide an example?
Political Risk;
the rules of the game on how a country is governed politically.
Example: Zimbabwe demanded that foreign mining companies cede 51% of their equity without pay.
What are the 3 Legal Systems?
Civil Law: Based on Roman Law; Comprehensive codes/statutes; oldest. Used in France, Germany, Japan.
Common Law: Based on previous precedents & traditions; more flexible. Used in the U.S., U.K., Australia.
Theocratic Law: Based in religious teaching; used in Iran, Saudi Arabia, and UAE.
What are property rights?
Legal rights to use economic property & derived income & other benefits from it.
How to protect Property Rights?
By legal systems (patents, copyrights, and trademarks), Country-specific laws (country by country), and Global agreements (Paris Convention and TRIPS under WTO)
What is Intellectual Property Rights (IPR)?
Intangible property from intellectual activity
i.e., Patents (inventions), Copyrights (creative works), Trademarks (brand identifiers)
What are the three types of Intellectual Property (IP) protection?
Patents (inventions-new technology), Copyrights (creative works-books), & Trademarks (brand identifiers).
How is IPR protected globally?
Enforced country by country; Paris Convention (the gold standard for global IP protection); TRIPS Agreement WTO: Requires adoption of Paris Convention
TRIPS (Trade-Related Aspects of Intellectual Property Rights)
WTO (World Trade Organization) Agreement on.
What are the business implications for conducting international business in countries with different political and economic systems?
Political and economic systems affect rules, risk, and market access; Market = private enterprise & trade; command = government control. Democracies more stable & legal transparency; totalitarian = high risk & less predictability.
Businesses must check legal systems, corruption, and IP protection before expanding.
Check laws, corruption, and IP protection.
Why are intellectual property protections critical in today’s global business environment?
• Encourages innovation
• Prevents counterfeiting
• Ensures fair competition
• Attracts investment
• Secures trade secrets
• Supports trade agreements
What is the Economic Systems?
the rules of the game on how a country is governed economically.
What are the three Economic Systems?
Market Economy: “Invisible Hand” of market forces of supply & demand, all factors of production should be privately owned (in pure form); emphasizes private property.
Command: Also called a Centrally Planned Economy, the government owns the factors of production, supply & demand, & pricing are planned by the government (in pure form); emphasizes publicly owned production.
Mixed Economy: Combines elements of market and command systems; most economies are mixed; most flexible
Describe the political system of Totalitarianism
Totalitarian countries often experience war, riots, protests, chaos, & breakdowns which result in higher political risks & negatively impact domestic & foreign firms.
