Chapter 2 Flashcards
Institutions
“rules of the game”
Institutional transitions
Fundamental and comprehensive changes introduced to formal and informal rules of
the game that affect firms as players
Institution-based view
Success and failure of firms are enabled and constrained by institutions
Institutional framework
Formal and informal institutions governing individual and firm behavior
Formal institutions
Laws, regulations, and rules - may be imposed by home countries and host countries
Norms
Values, beliefs, and actions
Regulatory pillar
formal - have to
Coercive power of governments
Normative pillar
informal - ought to
How values, beliefs, and actions of other relevant players influence behavior of focal individuals and firms
Cognitive pillar
informal - want to
Internalized, or taken for-granted, values and beliefs that guide individual and firm, or group, behavior
Transaction costs
Costs associated with economic transactions or, the costs of doing business – uncertainty, such as political or economic instability, can cause these costs to greatly rise
Opportunism
Act of seeking self-interest with guile (deceit): cheating or misleading, confusing others in transactions which will then increase their cost.
Political system
Rules of the game on how a country is governed politically
Political risk
Risk associated with political changes that may negatively impact domestic and foreign firms
Democracy
System in which citizens elect representatives to govern the country on their behalf
Totalitarianism (dictatorship)
System in which one person or party exercises absolute political control over the population
