Session 5

Question 1

Different locations have different institutions! What are the consequences of this statement?

Answer 1

Rules of the game (=constraints that structure human interaction)

Question 2

What is the institution based-view?

Answer 2

succes and failure a determined by the understanding of these rules, which leads firms to constantly monitor these institutions

Question 3

What is the main purpose of institutions?

Answer 3

reduce uncertainty

Question 4

What does uncertainty increase?

Answer 4

• transaction costs

- potential for opportunism

Question 5

Which dimensions of institutions exist?

Answer 5

• formal instituions

- informal institutions

Question 6

What are formal institutions?

Answer 6

institutions represented by laws, regulations and rules

Question 7

What are informal institutions?

Answer 7

rules that are not formalized but exist in for example norms and values

Question 8

What are the supportive pillars of formal institutions?

Answer 8

regulatory

Question 9

What are the supportive pillars of informal institutions?

Answer 9

• normative

- cognitive

Question 10

What does a political system do?

Answer 10

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

Question 11

What is a totalitarianism (dictatorship)?

Answer 11

system in which one person or party exercises absolite political control over the population

Question 12

What is democracy?

Answer 12

system in which citizens elect representatives to govern the country on their behalf

Question 13

What is a economic system?

Answer 13

rules of the game on how a country is governed economically

Question 14

What is a command economy?

Answer 14

all factors of production are government- or state owned and controlled; supply, demand and pricing are planned by the government

Question 15

What is a market economy?

Answer 15

characterised by the “invisible hand” of market forces; government takes hands-off or laissez faire approach

Question 16

Which types of market economy exist?

Answer 16

• liberal market economy

- coordinated market economy

Question 17

What is a legal system?

Answer 17

rules of the game on how country’s laws are enacted and enforced

Question 18

Which types of legal systems exist?

Answer 18

• civil law
• common law
• case law

Question 19

What is civil law?

Answer 19

legal tradition that uses comprehensive statutes and codes as primary means to form legal judgements

Question 20

What is common law?

Answer 20

legal tradition that is shaped by precedent and traditions from previous judicial decisions

Question 21

What is case law?

Answer 21

rules of the law that have been created by precedent cases in court

Question 22

Which fundamtental aspects are closely related to the legal system?

Answer 22

• property rights

- corporate governance

Question 23

What is religion?

Answer 23

• major manifestation of culture

- source of various differences in norms and values across countries

Question 24

How does religious beliefs and activities affect business through?

Answer 24

• religious festivals
• daily and weekly routines
• activities and objects with symbolic values - positive or negative

Question 25

To what do religious differences tend?

Answer 25

to raise emotions and thus are challenging to handle for businesses

Question 26

What does culture do?

Answer 26

culture thus is shared in a group, connecting members of the group with each other and with their history

Question 27

Which ways are given to systematically understand cultural differences?

Answer 27

1. cultural context
2. cultural clusters
3. cultural dimensions

Question 28

What are low-context cultures?

Answer 28

communication is usually taken at face value without much reliance on unspoken text

Question 29

What are high context cultures?

Answer 29

communication relies a lot on the underlying unspoken context which is important as the words used

Question 30

What are the cultural dimensions of Hofstede?

Answer 30

• power distance
• individualism
• masculinity
• uncertainty avoidance
• long-term orientation

Question 31

Was sagen Rothaermel, Kotha and Steensma in ihrem Text: “International market entry by U.S. internet firms: An empirical analysis of country risk, national culture and market size.”

Answer 31

• Internetunternehmen stehen vor einzigartigen Herausforderungen wenn eine Expansion ins Ausland eintritt
• Autoren postulieren, dass internationale Marktzugangsentscheidungen auf dem Ausgleichen wahrgenommener Risiken und zugehöriger Umsätze in einem Auslandszielmarkt basieren
• Landrisiko, kulturelle Entfernung und Unklarheitsvermeidung reduziert die Wahrscheinlichkeit des internationalen Marktzugangs, wohin gegen Individualismus und Männlichkeit es vergrößern
• Internationale Marktgröße mäßigt jedoch diese Beziehungen durch die Schwächung der negativen Effekte, während man positive Effekte stärkt

Question 32

What is political risk?

Answer 32

likelihood that political forces may cause drastic changes in a country’s business environment

Question 33

What is economic risk?

Answer 33

economic collapse in the host country can render a foreign firm’s assets worthless