Chapter 2 Flashcards
Institutional transition
Fundamental and comprehensive changes introduced
to the formal and informal rules of the game that affect firms as players
Institution-based view
A leading perspective in global business that suggests
that the success and failure of firms are enabled and constrained by institutions
Institution
Formal and informal rules of the game
Institutional framework
Formal and informal institutions that govern individual and firm behavior
Formal institution
Institution represented by laws, regulations, and rules
Regulatory pillar
The coercive power of governments
Informal institution
Institution represented by cultures, ethics, and norms
Normative pillar
The mechanism through which norms influence individual and firm behavior
Norms
Values, beliefs, and actions of relevant players that influence the focal individuals and firms
Cognitive pillar
The internalized (or taken-for-granted) values and beliefs that guide individual and firm behavior
Transaction cost
The cost associated with economic transactions or, more broadly, the cost of doing business
Opportunism
The act of self-interested seeking with guile
Transition economy
Label for a subset of emerging economies, particularly those moving from central planning to market competition (such as China, Poland, Russia, and Vietnam)
Bounded rationality
The necessity of making rational decisions in the absence of complete information
Nonmarket (political) strategy
A strategy that centers on leveraging political and social relationships
Institutional work
Purposive action aimed at creating, maintaining, and disrupting institutions
Political system
The rules of the game on how a country is governed politically
Democracy
A political system in which citizens elect representatives to govern the country
on their behalf
Totalitarianism (dictatorship)
A political system in which one person or party exercises
absolute political control over the population
Authoritarianism
A political system in which political plurality is undermined and
concentrated government power is imposed
Political risk
Risk associated with political changes that may negatively impact domestic and foreign firms
Geopolitics
International political relations
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 judgements
Common law
A legal tradition that is shaped by precedents and traditions from previous judicial decisions
Theocratic law
A legal system based on religious teachings
Property right
The legal right to use an economic property (resource) and to derive income and benefits from it
Intellectual property (IP)
Intangible property that is the result of the intellectual activity
Intellectual property rights (IPR)
Rights associated with the ownership of the intellectual property
Patent
Exclusive legal right of inventors of new products or processes to derive income from such inventions
Copyright
Exclusive legal right of authors and publishers to disseminate their work
Trademark
Exclusive legal right of firms to use specific names, brands, and designs to differentiate their products from others
Piracy
Unauthorized use of intellectual property
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 that is characterized by government ownership and control of factors of production
Mixed economy
An economy that has elements of both a market economy and a command economy
State-owned enterprise (SOE)
A firm owned and controlled by the state (government)
Moral hazard
Recklessness when people and organizations (including firms and governments) do not have to face the full consequences of their actions
State capitalism
A capitalist, market-based system with substantial state ownership
Moral hazard
Recklessness when people and organizations (including firms and governments) do not have to face the full consequences of their actions
State capitalism
A capitalist, market-based system with substantial state ownership
Hybrid organization
An organization that incorporates elements from different institutional logics
