Institutional Theory and Types of Institutions
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Questions and Answers

What do institutions provide according to institutional theory?

  • A framework for profit maximization
  • Support and infrastructure for decision makers (correct)
  • A platform for political activism
  • A system of rewards and penalties

    • What is the main characteristic of informal institutions?

  • They influence behavior through norms and values (correct)
  • They rely on laws and regulations
  • They promote competition and free markets
  • They use the threat of force and sanctions

    • What type of institution establishes standards and propagates principles?

  • Hybrid institutions
  • Formal institutions
  • Informal cognitive institutions
  • Informal normative institutions (correct)

    • What is the primary purpose of new institutional theory?

    <p>To understand institutions as social constructs that limit behavior</p> Signup and view all the answers

    What is an example of an informal cognitive institution?

    <p>A collection of shared ideas that define reality</p> Signup and view all the answers

    What is the key difference between formal and informal institutions?

    <p>Formal institutions use laws and regulations, while informal institutions use norms and values</p> Signup and view all the answers

    What was the main purpose of the 1944 conference?

    <p>To establish the International Monetary Fund and the World Bank</p> Signup and view all the answers

    What is the primary function of the World Bank?

    <p>To provide loans for development projects focused on reducing poverty</p> Signup and view all the answers

    What is the International Monetary Fund (IMF) responsible for?

    <p>Fostering global monetary cooperation, financial stability, international trade, high employment, and sustainable economic growth</p> Signup and view all the answers

    What is the purpose of special drawing rights (SDRs) established by the IMF?

    <p>To serve as an international reserve asset</p> Signup and view all the answers

    What is the main criticism of the IMF's approach to exchange rates?

    <p>It imposes fixed exchange rates with par value based on gold and the U.S. dollar</p> Signup and view all the answers

    What is one of the criticisms of the IMF's policies towards developing countries?

    <p>They force countries to adopt free-market policies</p> Signup and view all the answers

    What is a current issue facing the IMF?

    <p>Aid coupled with mandatory advice to reduce budget deficits and inflation leads to increased poverty</p> Signup and view all the answers

    What is a criticism of the IMF's governance structure?

    <p>It is dominated by developed Western countries</p> Signup and view all the answers

    What is the primary basis of compliance in a regulative institution?

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

    According to the new institutional theory, what is the primary logic of normative institutions?

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

    What is the primary indicator of institutionalization in cognitive institutions?

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

    What is the primary source of legitimacy in regulative institutions?

    <p>Legal enforcement</p> Signup and view all the answers

    What is the primary way in which informal institutions influence firm behavior?

    <p>Through prevalence, similarity</p> Signup and view all the answers

    What is the primary characteristic of normative institutions?

    <p>Compliance based on social obligation</p> Signup and view all the answers

    What is the primary way in which institutions influence managerial behavior?

    <p>Through norms</p> Signup and view all the answers

    What is the primary characteristic of cognitive institutions?

    <p>Compliance based on predisposition</p> Signup and view all the answers

    Which OECD member country is not a part of the European Union?

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

    What percentage of world trade is represented by the World Trade Organization's members?

    <p>98%</p> Signup and view all the answers

    Which of the following is NOT a principle of the World Trade Organization?

    <p>Encouraging economic isolation</p> Signup and view all the answers

    What is the primary goal of the Doha Development Agenda?

    <p>To promote economic development and reform in developing countries</p> Signup and view all the answers

    Which OECD member country is also a member of the G7?

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

    How many members does the World Trade Organization have?

    <p>164</p> Signup and view all the answers

    What is the title of the webpage that lists the OECD member countries?

    <p>Global Reach</p> Signup and view all the answers

    What is the name of the international organization that establishes and helps implement rules of trade between nations?

    <p>World Trade Organization</p> Signup and view all the answers

    What is the primary goal of Association of Southeast Asian Nations (ASEAN)?

    <p>To reduce tariffs and establish a free trade area known as AFTA</p> Signup and view all the answers

    What is the European Parliament's primary role?

    <p>To represent the people of Europe</p> Signup and view all the answers

    What is the main argument against international institutions, such as the United Nations?

    <p>They undermine national sovereignty and reduce the power of nation-states</p> Signup and view all the answers

    What is the primary objective of the European Union's Economic and Monetary Union (EMU)?

    <p>To establish a common currency among member states</p> Signup and view all the answers

    What is the primary role of the Council of the European Union?

    <p>To represent the member states of the European Union</p> Signup and view all the answers

    What is the main counterargument to the criticism that international institutions weaken national sovereignty?

    <p>That the benefits of supranational agreements far outweigh their trade-offs</p> Signup and view all the answers

    What is the primary purpose of the European Commission?

    <p>To administer the daily operations of the European Union</p> Signup and view all the answers

    What is the primary goal of bilateral trade agreements, such as NAFTA and Mercosur?

    <p>To reduce tariffs and establish a free trade area among participating countries</p> Signup and view all the answers

    Study Notes

    Institutional Theory

    • Insinsufficient coordination among parties, leading to social and economic inefficiencies.way to resolve conflicts before These inefficient coordination mechanisms can lead to inconsistent decision-making, disrupting the overall functioning of an organization or society, and ultimately slowing down economic growth..
    • New Institutional Theory views institutions as social constructs that l
    • imit behavior and provide rules for business. This perspective suggests that institutions can shape the way individuals interact with each other, influencing decisions and actions in both formal and informal settings.
    • Formal Institutions: These institutions exist in written form, such as laws, regulations, and contracts, and are enforced by external authorities. They use the threat of force and sanctions to prompt compliance.
    • Institutions are collections of norms that structure the relations of individuals to one another.

    Types of Institutions

    • Formal Institutions: influence behavior through laws and regulations, use threat of force and sanctions.
    • Informal Institutions: influence behavior through norms, values, customs, and ideologies, no penalty for noncompliance.
    • Informal Normative Institutions: organizations that establish standards and propagate principles (e.g. UN, NGOs).
    • Informal Cognitive Institutions: collections of shared ideas that define reality by means of conceptual frameworks or schema (e.g. guanxi).

    Characteristics of Institutions

    • Institution Type: Formal, Informal, Informal Normative, Informal Cognitive
    • Social Agreement: Regulative, Normative, Cognitive
    • Compliance: Expedience, Social Obligation, Predisposition
    • Institutionalization: Coercion, Norms, Imitation
    • Logic: These three logics, namely Means to an End, Appropriateness, and Conformance, serve as guiding principles for institutional behavior. Means to an End refers to the pursuit of specific goals or outcomes, while Appropriateness emphasizes the relevance and adequacy of actions aligning with the institution's objectives. Conformance, on the other hand, deals with the conformity of actions to established rules and standards.
    • Legitimacy: Legal, Moral Governance, Cultural Support
    • Indicators/Evidence: Rules, Laws, Sanctions, Certification, Accreditation, Prevalence, Similarity

    International Monetary Institutions

    • International Monetary Fund (IMF): fosters global monetary cooperation, financial stability, international trade, high employment, sustainable economic growth, and reduction of poverty.
    • IMF provides Special Drawing Rights (SDRs), an international reserve asset established by the IMF.
    • IMF and Exchange Rates: Fixed exchange rates with par value based on gold and the U.S. dollar.
    • Criticisms of the IMF: forcing free-market policies obn poor countries, increasing poverty and political chaos.

    International Monetary Institutions (Cont.)

    • Current IMF issues: aid coupled with mandatory advice to reduce budget deficits and inflation, leading to increased poverty.
    • IMF largely controlled by developed Western countries.
    • IMF strengthens economies of dictatorial regimes, making them markets for multinationals.
    • IMF attempts to address these issues.

    World Development and Trade Organizations

    • World Trade Organization (WTO): establishes and helps implement rules of trade between nations, with 164 members representing 98% of all world trade.
    • WTO Principles: trade without discrimination, freer trade through negotiation, predictability through binding and transparency, promoting fair competition, encouraging development and economic reform, and protecting the environment.

    Economic Integration Agreements

    • Association of Southeast Asian Nations (ASEAN): agreement among Southeast Asian nations that began as a security agreement, grew to a free trade agreement, and is continuing toward a free trade area, known as AFTA.
    • European Union (EU): a body of 27 European countries that resulted from the Maastricht Treaty, with three areas of integration: economic, foreign policy, and domestic affairs.

    Economic Integration Agreements (Cont.)

    • European Union: Economic and Monetary Union (EMU) established the euro, with the European Parliament representing the people of Europe, the Council of the European Union representing the member states, and the European Commission administering daily operations.
    • ASEAN and EU: examples of economic integration agreements.

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    Learn about Institutional Theory, its role in resolving conflicts, and the different types of institutions, including formal and informal institutions.

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