OA Political and Economic Forces Flashcards
(15 cards)
State Ownership
In state ownership, protecting jobs and minimizing social unrest is the objective of a firm. Example: A state-run airline may keep unprofitable routes to maintain jobs and regional service.
Intellectual Property
Intellectual property refers to creations of the mind such as inventions, literary and artistic works, and symbols. Example: A software company’s proprietary code is protected under intellectual property laws.
Informal Institutions
Informal institutions are norms, cultures, and ethics that influence behavior. Example: In Japan, business etiquette and honorifics play a crucial role in corporate interactions.
Cultural Explanation of Economic Development
Proposes that economic development is linked to cultural traits like work ethic. Example: Countries like Germany and Japan are often cited for strong work cultures contributing to growth.
Institution-Based View Proposition
When formal constraints are unclear, informal ones guide business behavior. Example: In emerging markets, personal trust and reputation may substitute for weak legal enforcement.
Command Economy
An economy where the government controls all production and prices. Example: North Korea is a command economy with no private entrepreneurship.
Formal Institutions
Institutions represented by laws, regulations, and rules. Example: Environmental protection laws enforced by the EPA in the U.S.
Theocratic Law
A legal system based on religious teachings. Example: Iran uses Islamic law (Sharia) as the basis for its legal system.
Pillars of Informal Institutions
Normative and cognitive elements support informal institutions. Example: Social norms and shared mental models influence behavior where laws are weak.
Private Ownership
Firms are established by entrepreneurs, owners, and investors. Example: Apple Inc. is privately owned and its leaders are selected by shareholders.
Civil Law System
A legal system where laws are codified, and judges apply them rather than interpret. Example: France follows the civil law system based on written statutes.
Copyrights
Exclusive legal rights of authors and publishers to publish and disseminate their work. Example: A novelist owns the copyright to their published book.
Role of Institutions in Business
Institutions reduce uncertainty in business transactions. Example: Contract enforcement laws reassure investors their agreements will be honored.
Intellectual Property Rights
Legal rights protecting intangible creations like trademarks. Example: The Nike swoosh logo is a trademark protected by IP laws.
Cognitive Pillar
Refers to taken-for-granted beliefs guiding behavior. Example: Belief in entrepreneurship as a path to success can encourage new startups.
