Chapter 2 Flashcards
Institutions:
Formal and informal rules of the game
Institutional framework:
Formal and informal institutions governing individual and firm behaviour
Institution-based view:
A theoretical perspective suggesting that firm performance is, at least in
part, determined by the institutional frameworks governing firms
Transaction costs:
The costs of organizing economic transactions
Informal institutions:
Rules that are not formalised but exist in, for example, norms, values and ethics
Formal institutions:
Institutions represented by laws, regulation and rules
Cognitive pillar:
Institutiona influence behavior through deeply internaliseds belifes and assumpions that feel “natural” or “obvious”
Normative pillar:
Instututions influence behaviour through social values, norms, and expectations
Regulatory pillar:
Institutions influence behaviour through rules, laws, and formal sanctions
Opportunist behaviour:
Seeking self-interest with guile
Institutional transition:
Fundamental and comprehensive changes introduced t the formal and
informal rules of the game that affect organizations as players
Institution-based view
Proposition 1
Managers and firms rationally pursue their interest and make choices within the formal and informal constraints in a given institutional framework
Institution-based view
Proposition 2
Although formal and informal institutions combine to govern firm behaviour, in situations where formal constrains are unclear or fail, informal constraints will play a larger role in reducing uncertainty and providing constancy to managers and firms
Political system:
A system of 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
Proportional representation:
Election system that allocated seats in parliament in proportion to
the votes received by each party (usually subject to minimum threshold)
First-past-the-post system:
Election system by which in each constituency the candidate with
the relative majority of votes gets the seat
Authoritarianism:
A political system in which power is concentrated in the hands of one person
or a small elite
Lobbying:
Making you views known to decision makers with the aim to influence political
processes
Corruption:
The abuse of public power for private benefits
Non-market strategy:
Political and social activities aimed at influencing the rules set in their host countries
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 characterised 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 capitalism:
A scholarly view suggesting that economies have different inherent logics
on how markets and other mechanisms coordinate economic activity
Varieties:
=> Liberal market economy
=> Coordinated market economy
Liberal market economy (LME):
A system of coordination primary through market signals
=> companies are predominantly financed through the stock market, while labour markets are highly flexible
Coordinated market economy (CME):
A system of coordinating through a variety of other means
in addition to market signals
=> collaborations between firms, units, and governments play a bigger role
Apprenticeship system:
Vocational training system for crafts and professions
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 precedents of cases in court
Legal certainty:
Clarity over the 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 (IPRs):
Rights associated with the ownership of intellectual property
Patents:
Legal rights awarded by government authorities to investors 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
