Institutional Context Supplement 4 Flashcards
organizational field
set of organizations that, together, constitute a recognized connected area of institutional activities
They interact more frequently and at a deeper level with each other than with organizations outside of the field.
In an organizational field with which other institutions does an organization reside with?
with organizations from the Market, State, and Civil Society which directly influence through coercive, normative and mimetic isomorphic pressure
Where is the legitimacy of organizations determined?
Within the organizational field.
clusters in context of organizational fields
special case of organizational fields, which explains the importance of institutional proximity, and on institutional distance.
Definition of clusters
critical masses - in one place - of unusual competitive success in particular fields.
How was the location decision determined for old style clusters?
driven by lowering input costs
Can old style clusters easily transform into new style clusters?
No, old style clusters have important knowledge but little motivation to innovate. They may transform into new style clusters but it is often difficult.
What happened to old style clusters?
They are disappearing or becoming more vulnerable because member firms are unable to compete on the base of input costs. Due to global sourcing.
What are new style clusters built for?
For the purpose of making more productive use of inputs. So they concentrate more on the throughput of the input to generate output. Input cost disadvantage can be overcome through global sourcing.
What do new style clusters emphasize?
They emphasize continual innovation through developing core organizational capabilities and participating in a vibrant external environment that fosters intense innovation in the industry.
What is competitive advantage based on in new style clusters?
- knowledge
- relationships
- motivation
Where are the resources for competitive advantage obtained?
locally. Competitive advantage is geographically concentrated.
Knowledge and relationships are obtained locally.
How are firms connected in new style clusters?
- linked horizontally across related industries with manufacturers of complementary (ergänzend) products
- vertically through connected suppliers of specialized inputs and eager and knowledgable buyers
What does the state do in new style clusters?
Public spending to promote the cluster.
It has a role in building and perfecting the infrastructure for economic progress.
Regulatory institutions like flexible tax systems, making regulations more flexible for start-ups, providing a level playing field to foster healthy rivalry.
What does the Market do in new style clusters?
Strong presence
formal and informal institutions stimulate more intense competition
What do market players develop in the new style cluster?
Market players develop a shared language and worldview through a specific cluster culture
What effect occurs in the market sphere of a new style cluster?
The Red Queen Effect.
What is the Red Queen Effect?
Norms of excellence develop. This theory suggests that a self-reinforcing process of learning among competitors occurs. One firms’ innovation breeds another firm’s expectations. A normative pressure to be innovative and excel evolves.
What does the Civil Society do in the cluster?
Civil Society contains the most knowledgable and powerful consumers of the cluster products. + Look at slides starting slide 15
Why can clusters be so successful?
Because institutional spares are aligned to positively influence productivity, innovation, and new business formation.
Are institutional spheres tightly connected?
Yes. Their expectations and worldview are aligned.
Which other institutional spheres can be found in the new clusters?
Hybrid organizational forms
When can the strong alignment of the spheres backfire?
when alignment leads to internal rigidities.
What is positive about rival clusters?
They are aligned with the changing world demands
What are most of the costs of doing business abroad related to?
To the institutional differences between countries.
What are the two types of costs?
Information and legitimacy costs
Information costs
related to a lack of knowledge, understanding or insight about the local institutions
Which institutional differences are the most difficult to bridge?
cognitive institutions
Legitimacy costs
related as being viewed in some way as being less legitimate (rechtmäßig) than local rivals.
How do legitimacy costs arise
Through violation of the regulative, normative and cognitive institutions.
or
because of pre-disposed opinions by the domestic State, Market and Civil Society parties. (reflects a form of guilt by association)
How can legitimacy costs be overcome?
Through partnerships with local firms and forging ties with local members of the State and Civil Society.
Regulative distance
refers to the extent to which administrative systems, and associated regulatory institutions, in one country differ from those in another.
It reflects differences in political and legal systems.
Common law system
United States and United Kingdom use it.
Based on tradition, precedents, and habits.
It stresses past cases and practices, and leaves some room for judges to interpret these precedejnts.
precedent = vorangehend
Civil law
Used in most European countries.
Based on a code book that needs to be followed closely by the judges.
Theocratic legal systems
Islamic law, which is characterized by a more moral law based on the Koran.
Economic distance
refers to the differences between countries In institutional development.
What do large economic differences express themself with?
In large differences in consumer needs, quality of infrastructure, and labor force composition.
What opportunities do economic differences provide?
Differences can provide opportunities for institutional arbitrage
Cultural distance
refers to the differences between normative and cognitive institutions of countries.
What is the sixth dimension Hofstede recently included?
indulgence, which stands for a society that allows relatively free gratification (Befriedigung) of basic and natural human drives related to enjoying life and having fun.
Five ways in which cultural differences may influence international activity.
- cultural clash
- cultural enrichment
- cultural complementary
- cultural adaptation
- cultural capability
- cultural clash
A cultural clash assumption emphasizes that differences lead to misunderstandings, conflict and distrust.
- cultural enrichment
differences lead to opportunities to learn how to approach tasks, activities and practice in a different way. Which may benefit the combined effort in cross-border activities.
- cultural complementary
cultures should neither be too similar nor to different
- cultural adaptation
mirror image of the cultural complementary assumption.
Cross-border activity will be less problematic when the cultures are similar or really different because both are foreseeable. It the cultures are moderately different, however, people are likely to expect similarities, while facing unexpected differences.
- cultural capability
Cultural differences by themselves do not matter. The way in which firms deal with the cultural differences is what matters.
What shapes of distance matters for trade?
Geographic distance matters. Economic differences do not matter that much because opportunities and and challenges outweigh each other.
How much is trade higher when countries share a boarder?
trade is generally 80% higher than wehen countries do not share a boarder.
How much is trade higher when countries share a common language?
Trade increases 200%
How much is trade higher when countries are a member of a common regional trading block?
Trade increases by 330%. Having a colony-colonizer relationship increases trade by 900%.
