Globalization, Trade, and FDI Quiz
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Questions and Answers

What is the primary purpose of institutions in the context of international management?

  • To provide stability and meaning to social life (correct)
  • To eliminate all forms of economic uncertainty
  • To facilitate foreign direct investment only
  • To promote globalization and international trade

    • Which of the following best describes foreign direct investment (FDI)?

  • Investment that occurs when a firm invests directly in production and maintains control (correct)
  • A method of investing through international financial markets
  • Investment in financial assets such as stocks and bonds
  • The exchange of goods and services across borders without direct ownership

    • Which of the following is NOT considered a component of formal institutions?

  • Regulations
  • Laws
  • Rules
  • Norms (correct)

    • What type of economic system is characterized by government control over resource allocation?

    <p>Command economy</p> Signup and view all the answers

    Which of the following pillars supports informal institutions?

    <p>Normative</p> Signup and view all the answers

    What is the primary focus of the 'thin' view of institutions?

    <p>Legal entities with established rules</p> Signup and view all the answers

    How do institutions influence multinational enterprises (MNEs) according to the 'thin' view?

    <p>By constraining actions based on local laws</p> Signup and view all the answers

    What does isomorphism in organizational behavior refer to?

    <p>Uniformity of structures and practices across organizations</p> Signup and view all the answers

    What is a key characteristic of the 'thick' view of institutions?

    <p>Inclusion of informal norms and cultural values</p> Signup and view all the answers

    What do institutions provide to economic agents according to the 'thick' view?

    <p>Incentives and constraints shaping behavior</p> Signup and view all the answers

    What influences organizational structure and practices the most due to institutional pressures?

    <p>Laws and professional standards</p> Signup and view all the answers

    Which statement best describes the role of institutions in shaping managerial decisions?

    <p>They influence both identity and capacities for action</p> Signup and view all the answers

    What does culture ensure within a social group?

    <p>Uniformity and predictability of behaviors</p> Signup and view all the answers

    Which of the following concepts is closely correlated with culture?

    <p>Language</p> Signup and view all the answers

    In Hofstede's framework, what does high power distance indicate?

    <p>Acceptance of unequal power distribution</p> Signup and view all the answers

    What is a characteristic of organizations in high power distance cultures?

    <p>Tall organizational pyramids</p> Signup and view all the answers

    What role does language play in perpetuating culture?

    <p>It helps convey key values and norms</p> Signup and view all the answers

    Which dimension was NOT one of the original dimensions in Hofstede's study?

    <p>Gender equality</p> Signup and view all the answers

    How are the behaviors and traditions of religious adherents influenced?

    <p>By key values and norms within their religion</p> Signup and view all the answers

    What does a high power distance culture typically value?

    <p>Large wage differentials</p> Signup and view all the answers

    What is a result of cultural learning through language and imitation?

    <p>Cultures are perpetuated and shared across generations</p> Signup and view all the answers

    What is a key characteristic of firms in Liberal Market Economies (LMEs)?

    <p>They emphasize flexibility in coordination arrangements.</p> Signup and view all the answers

    Which type of innovation is more commonly followed by firms in Coordinated Market Economies (CMEs)?

    <p>Incremental innovation</p> Signup and view all the answers

    Which of the following is true regarding the sector focus of firms in LMEs compared to CMEs?

    <p>LMEs and CMEs differ in the economic sectors they operate in.</p> Signup and view all the answers

    What type of relation is emphasized by firms in LMEs?

    <p>Arm's length relations</p> Signup and view all the answers

    Which process do firms in CMEs utilize to resolve coordination problems?

    <p>Strategic interaction through non-market institutions</p> Signup and view all the answers

    What does comparative institutional advantage lead to in LMEs?

    <p>Flexibility of coordination arrangements.</p> Signup and view all the answers

    What is a significant finding regarding the classification of liberal and coordinated economies?

    <p>A majority of liberal economies are classified correctly.</p> Signup and view all the answers

    How do firms in CMEs typically behave compared to those in LMEs?

    <p>They emphasize cooperative behaviors founded on information exchange.</p> Signup and view all the answers

    What is a typical outcome of the institutional frameworks in LMEs?

    <p>High levels of competition and market coordination.</p> Signup and view all the answers

    Study Notes

    Globalization, Trade, and FDI

    • Globalization is the growing interconnectedness of the international economy.
    • International trade involves the exchange of goods and services across borders.
    • Foreign Direct Investment (FDI) occurs when a firm invests in production or facilities in a foreign country.
    • Foreign portfolio investment involves investments in foreign financial assets like stocks and bonds.

    Institutions

    • Institutions are a set of formal and informal rules followed by actors.
    • Key functions of institutions include reducing uncertainty, curbing transaction costs, and constraining opportunism.
    • Institutions are comprised of regulative, normative, and cognitive elements.
    • Formal institutions include laws, regulations, and rules.
    • Informal institutions include norms, cultures, and ethics.
    • Institutions framework components: political, economic, and legal systems.
    • Further institutions include property rights and corporate governance.
    • Two main informal institutions are cultures and ethics.

    Culture as an Informal Institution

    • Culture is an informal institution, learned behaviors, values, and beliefs shared among people.
    • Culture is built on norms, values, symbols and traditions and affects behaviour and managerial decisions.
    • Cultures with similar beliefs, values, and norms can be grouped (GLOBE, Hofstede)
    • Two views of institutions: "thin" and "thick"
    • "Thin" view, focus on formal structures and regulations, constrain actions of multinational enterprises (MNE)
    • "Thick" view, broader societal context influencing managerial decisions and actions.

    Multinational Enterprises (MNEs)

    • MNEs are key actors in international business, operating in multiple countries.
    • MNEs maintain units in several countries, local headquarters and foreign subsidiaries
    • Key challenge for MNE managers is to balance global unity and flexibility, adapting to local conditions.
    • MNE strategies need to adapt to their countries of origin and emerging markets.

    MNEs and Global Governance

    • MNEs are considered major global promoters of economic development.
    • MNEs can also be seen as instruments of exploitation due to concerns about their international supply chains. International labor standards are a concern.

    International Human Resource Management (IHRM)

    • IHRM involves managing human resources (recruitment, training, and performance management) across multiple countries.
    • Balancing global consistency with local adaptations in HR practices is key.
    • Strategic international HRM (SIHRM) for example aligns HR policies with MNE's overall international goals, to support global competitiveness and market adaptation.

    Varieties of Capitalism Approach

    • Capitalism is a system with private ownership, free enterprise and reliance on markets and competition
    • Two ideal types of capitalism (LMEs-Liberal Market Economies and CMEs- Coordinated Market Economies)
    • LMEs rely on hierarchies and competitive markets.
    • CMEs rely more on non-market relationships to coordinate activities.
    • Complementary institutions create economic competitiveness and lead to better economic results.

    Cultures as Informal Institutions, Continued

    • Culture influences how we communicate, make decisions, behave in groups, and interact with others.
    • There are different types of culture in various parts of the world and these classifications can be used to describe/compare cultures
    • GLOBE study developed cultural dimensions – Hofstede and Globe dimensions used to analyse culture
    • Cultures categorized by national borders, but can contain multiple cultures.

    National Cultural Classifications

    • Hofstede's study provided a framework with dimensions like power distance, uncertainty avoidance, and masculinity/femininity, describing cultural variations across nations, which can influence management practices.
    • GLOBE expanded on Hofstede's framework.
    • These classifications can help understand and adapt to cultural differences.

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    International Management Lecture 1: Introduction PDF

    Description

    Test your knowledge on globalization, international trade, and foreign direct investment. This quiz also covers the role of institutions in shaping economic interactions. Challenge yourself with questions that explore both formal and informal institution frameworks.

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