Chapter 4 - Institution-based view

Question 1

What is an institution?

Answer 1

Humanly devised constraints that structure human interactions

Question 2

What are the three pillars supporting institutional framwork.

Answer 2

• Regulatory (formal and coercive)
• Normative (informal)
• Cognitive (informal)

Question 3

What is Institutional Framework?

Answer 3

Formal and informal institutions governing individual and firm behaviors seperated into two types of institutions:
- formal: law, regulation, and rules (regulatory pillar)
- informal: norms, culture, and ethics (normative and cognitive pillars)

Question 4

What is the key function of institutions?

Answer 4

To reduce uncertainty
- Rational contracting
- Arm’s lenght transaction

Question 5

What is the institution-based view?

Answer 5

Relationship between strategic choices and institutional framework

Strategic choices are a direct outcome of the dynamic interaction between institutions and firms

Question 6

What is the Porter Diamond?

Answer 6

Determinants of national competitive advantage

Question 7

What are the four components of the Porter Diamond?

Answer 7

• Firm strategy, structure, and rivalry
• Domestic demand conditions
• Related and supporting industries
• Country factor endowments

Question 8

What is Institutional void?

Answer 8

Lack of market-supporting institutions that facilitate economic transactions, weak legal system, weak IP protection

Question 9

What are the five dimensions of Culture?

Answer 9

• Power distance
• Individualism VS collectivism
• Musculinity VS femininity
• Uncertainty avoidance
• Long-term orientation

Question 10

What is Ethics?

Answer 10

Norms, principles, and standards of conduct that govern behaviors
=> motivation: negative view, positive view, instrumental view

Question 11

What are the effects of Corruption?

Answer 11

Cause misallocation of resources and slows economic development