Chap. 2

Question 1

Institutional Framework

Answer 1

Formal and informal institutions governing individual and firm behavior

Question 2

Formal Institution

Answer 2

Institutions represented by laws, regulations and rules

Question 3

Informal Institutions

Answer 3

Rules that are not formalized but exist in for example norms and values

Question 4

Regulatory Pillar

Answer 4

The coercive power of governments

Question 5

Normative Pillar

Answer 5

The mechanism through which norms influence individual and firm behavior.

Question 6

Cognitive Pillar

Answer 6

The internalized, taken-for-granted values and beliefs that guide individual and firm behavior

Question 7

Transaction costs

Answer 7

The costs associated with economic transactions

Question 8

Opportunistic behavior

Answer 8

Seeking self-interest with guile

Question 9

Institutional transition

Answer 9

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

Question 10

Political System

Answer 10

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

Question 11

Totalitarianism (dictatorship):

Answer 11

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

Question 12

Democracy

Answer 12

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

Question 13

Political Risk

Answer 13

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

Question 14

Economic System

Answer 14

Rules of the game on how a country is governed economically

Question 15

Market Economy

Answer 15

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

Question 16

Command Economy

Answer 16

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 17

Varieties of capitalisms view

Answer 17

A scholarly view suggesting that economies have different inherent logics or how markets and other mechanisms coordinate economic activity

Question 18

Liberal Market Economy

Answer 18

A system of coordination primarily through market signals

Question 19

Coordinated Market Economy

Answer 19

A system of coordinating through a variety of other means in addition to market signals.

Question 20

Legal System

Answer 20

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

Question 21

Civil Law

Answer 21

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

Question 22

Common Law

Answer 22

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

Question 23

Case Law

Answer 23

Rules of law that have been created by precedent of cases in court.

Question 24

Legal Certainty

Answer 24

Clarity over relevant rules applying to a particular situation

Question 25

Property Rights

Answer 25

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

Question 26

Intellectual Property Rights

Answer 26

Rights associated with the ownership of intellectual property

Question 27

Patents

Answer 27

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

Question 28

Copyrights

Answer 28

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

Question 29

Trademarks

Answer 29

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

Question 30

Corporate Governance

Answer 30

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