Chap. 2 Flashcards
Institutional Framework
Formal and informal institutions governing individual and firm behavior
Formal Institution
Institutions represented by laws, regulations and rules
Informal Institutions
Rules that are not formalized but exist in for example norms and values
Regulatory Pillar
The coercive power of governments
Normative Pillar
The mechanism through which norms influence individual and firm behavior.
Cognitive Pillar
The internalized, taken-for-granted values and beliefs that guide individual and firm behavior
Transaction costs
The costs associated with economic transactions
Opportunistic behavior
Seeking self-interest with guile
Institutional transition
Fundamental and comprehensive changes introduced to the formal and informal rules of the game that affect organizations as players
Political System
A system of the rules of the game on how a country is governed politically.
Totalitarianism (dictatorship):
A political system in which one person or party exercises absolute political control over the population
Democracy
A political system in which citizens elect representatives to govern the country on their behalf.
Political Risk
Risk associated with political changes that may negatively impact on domestic and foreign firms
Economic System
Rules of the game on how a country is governed economically
Market Economy
An economy that is characterized by the invisible hand of market forces
Command Economy
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.
Varieties of capitalisms view
A scholarly view suggesting that economies have different inherent logics or how markets and other mechanisms coordinate economic activity
Liberal Market Economy
A system of coordination primarily through market signals
Coordinated Market Economy
A system of coordinating through a variety of other means in addition to market signals.
Legal System
The rules of the game on how a country’s laws are enacted and enforced.
Civil Law
A legal tradition that uses comprehensive statutes and codes as a primary means to form legal judgments
Common Law
A legal tradition that is shaped by precedents and traditions from previous judicial decisions
Case Law
Rules of law that have been created by precedent of cases in court.
Legal Certainty
Clarity over relevant rules applying to a particular situation
Property Rights
The legal rights to use an economic property (resource) and to derive income and benefits from it
Intellectual Property Rights
Rights associated with the ownership of intellectual property
Patents
Legal rights awarded by government authorities to inventors of new technological ideas, who are given exclusive (monopoly) rights to derive income from such inventions
Copyrights
Exclusive legal rights of authors and publishers to publish and disseminate their work
Trademarks
exclusive legal rights of firms to use specific names, brands and designs to differentiate their products from others
Corporate Governance
Rules by which shareholders and other interested parties control corporate decision makers
