Legal/Ethical/Political Stream: Institutions (week 1) Flashcards
What are institutions in the context of society?
Institutions are the humanly devised constraints that structure human interaction. They include formal and informal rules that help reduce uncertainty and improve interactions between different actors in society.
What are formal institutions, and how are they enforced?
Formal institutions consist of written constraints such as constitutions, laws, and regulations. They are enforced using coercive power, and violation may result in penalties like fines.
What are informal institutions, and how do they influence behavior?
Informal institutions consist of unwritten rules, conventions, and codes of behavior rooted in culture, norms, and values. They significantly impact behavior and trust in society but do not lead to formal penalties when violated.
How do political systems affect business?
Political systems influence business by impacting political stability, transparency, and the respect for private property rights. They also affect what is considered morally and ethically appropriate.
What are the main types of political systems, and how do they differ?
Political systems include collectivism (sacrificing individual rights for society) and individualism (emphasizing individual freedom). They also vary between democracy (governance by all eligible members) and totalitarianism (centralized and dictatorial governance).
What role do informal institutions play in business?
Informal institutions are crucial in building trust and reputation in business transactions. Adapting to local norms and values is essential when entering new markets.
How does understanding formal and informal institutions benefit businesses?
Understanding these institutions helps businesses navigate different markets, make ethical decisions, and avoid default or penalties. It is also linked to political systems, ethical debates, and legal matters.
How do legal systems differ, and what are the main types?
Legal systems differ in their approach to law. Common law relies on tradition and precedent, civil law is based on codes and inquisitorial proceedings, and theocratic law is rooted in religious teachings.
Why is understanding ethical behavior important in business?
Understanding ethical behavior is crucial for firms to perform well in different markets. Ethical behavior aligns with informal institutions and cultural norms.
