Chapter 02 - Formal Institutions Flashcards
explain the concept of institutions and their key role in reducing uncertainty.
articulate the two core propositions underpinning an institution-based view of global
business.
identify the basic differences between democracy and totalitarianism.
outline the differences among civil law, common law, and theocratic law.
understand the importance of property rights and intellectual property rights.
appreciate the differences among market economy, command economy, and mixed
economy.
participate in two leading debates concerning politics, laws, and economics
Formal institutions
represent laws, regulations, and rules
Informal institutions
cultures, ethics, and norms
Institutional framework
formal/informal institutions shape and govern firms behavior
Institutional transition
changes that effect informal/formal rules of the game and thus firms
Institution based view
perspective that suggests that formal/informal shape success for a firm
Norms
values, beliefs, and actions that effect focal individuals and firms
Key Function of Institutions
Reduce uncertainty
Opportunism
seeking self interest with guile
Transaction Costs
the cost of doing buisness
Bounded Rationality
necessity of making rational decisions in the absence of complete information
communist totalitarianism
centers around communist party
democracy
citizens elect reps. to govern the country on their behalf
political risk
associated w/political changes that may negatively impact domestic and foreign firms
Political system
rules of the game
Theocratic totalitarianism
monopolizes political power in the hands of one religious party
Totalitarianism (dictatorship)
one person or party exercises absolute political control over the population
Civil Law
uses comprehensive statutes and codes as a primary means to form legal judgements
