Chapter 2 Peng

Question 1

Cognitive pillar

Answer 1

refers to the internalized, taken-for-granted values and beliefs that guide individual and firm behavior.

Question 2

Formal institutions

Answer 2

include laws, regulations, and rules.

Question 3

Informal institutions

Answer 3

include norms, cultures, and ethics.

Question 4

Institutional framework

Answer 4

is made up of formal and informal institutions governing individual and firm behavior.

Question 5

Institution-based view

Answer 5

requires firms to constantly monitor, decode, and adapt to the changing rules of the game to survive and prosper.

Question 6

Institutions

Answer 6

are popularly known as “the rules of the game.”

Question 7

Institutional transitions

Answer 7

are fundamental and comprehensive changes introduced to the formal and informal rules that affect firms as players.

Question 8

Normative pillar

Answer 8

refers to how the values, beliefs, and actions of other relevant players—collectively known as norms —influence the behavior of local individuals and firms.

Question 9

Regulatory pillar

Answer 9

is the coercive power of governments.

Question 10

Institutional transitions

Answer 10

defined as “fundamental and comprehensive changes introduced to the formal and informal rules of the game that affect organizations as players.”

Question 11

Transaction costs

Answer 11

efined as costs associated with economic transactions—or more broadly, costs of doing business.

Question 12

Communist totalitarianism

Answer 12

centers on a communist party.

Question 13

Democracy

Answer 13

is a political system in which citizens elect representatives to govern the country on their behalf.

Question 14

Political risk

Answer 14

risk associated with political changes that may negatively impact domestic and foreign firms.

Question 15

Political system

Answer 15

refers to the rules of the game on how a country is governed politically.

Question 16

Right-wing totalitarianism

Answer 16

is characterized by its intense hatred of communism.

Question 17

Theocratic totalitarianism

Answer 17

refers to the monopolization of political power in the hands of one religious party or group.

Question 18

Totalitarianism (dictatorship)

Answer 18

is defined as a political system in which one person or party exercises absolute political control over the population.

Question 19

Tribal totalitarianism

Answer 19

refers to one tribe or ethnic group (which may or may not be the majority of the population) monopolizing political power and oppressing other tribes or ethnic groups

Question 20

Political Risk

Answer 20

involves risk associated with political changes that may negatively impact domestic and foreign firms.

Question 21

Civil law

Answer 21

uses comprehensive statutes and codes as a primary means to form legal judgments.

Question 22

Common law

Answer 22

is shaped by precedents and traditions from previous judicial decisions.

Question 23

Copyrights

Answer 23

are the exclusive legal rights of authors and publishers to publish and disseminate their work.

Question 24

Intellectual property

Answer 24

specifically refers to intangible property that results from intellectual activity (such as books, videos, and websites)

Question 25

ntellectual property rights (IPRs)

Answer 25

Intellectual property rights (IPRs) are rights associated with the ownership of intellectual property. IPRs primarily include rights associated with (1) patents, (2) copyrights, and (3) trademarks.

Question 26

Legal system

Answer 26

refers to the rules of the game on how a country’s laws are enacted and enforced.

Question 27

Patents

Answer 27

are legal rights awarded by government authorities to inventors of new products or processes, who are given exclusive rights to derive income from such inventions through activities such as manufacturing, licensing, or selling.

Question 28

Piracy

Answer 28

The unauthorized use of IPRs is widespread, ranging from unauthorized sharing of music files to deliberate counterfeiting of branded products.

Question 29

Property rights

Answer 29

The legal rights to use an economic property (resource) and to derive income and benefits from it.

Question 30

Theocratic law

Answer 30

A legal system based on religious teachings.

Question 31

Trademarks

Answer 31

are the exclusive legal rights of firms to use specific names, brands, and designs to differentiate their products from others.

Question 32

Economic system

Answer 32

refers to the rules of the game on how a country is governed economically.

Question 33

Market economy

Answer 33

is a term referring to a system characterized by the “invisible hand” of market forces: government takes a hands-off approach known as the laissez faire.

Question 34

Mixed economy

Answer 34

by definition, is an economic system that has elements of both a market economy and a command economy.

Question 35

Market transition debate

Answer 35

pertains to how to make the transitions work in a most effective and least disruptive way.

Question 36

Moral hazard

Answer 36

efers to recklessness when people and organizations (including firms and governments) do not have to face the full consequences of their actions.

Question 37

Path dependency:

Answer 37

the present choices of countries (as well as firms and individuals) are constrained by the choices made previously.

Question 38

Washington Consensus

Answer 38

is a view centered on the unquestioned belief in the superiority of private ownership over state ownership in economic policymaking that is often spearheaded by two Washington-based international organizations: the International Monetary Fund and the World Bank.