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Questions and Answers
Which type of legal system is primarily based on religious teachings?
Which type of legal system is primarily based on religious teachings?
What is the primary characteristic of a market economy?
What is the primary characteristic of a market economy?
Which of the following factors contributes to higher political risk in a country?
Which of the following factors contributes to higher political risk in a country?
Which of the following is NOT a type of intellectual property right?
Which of the following is NOT a type of intellectual property right?
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What is the term used for the unauthorized use of intellectual property?
What is the term used for the unauthorized use of intellectual property?
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Which of the following BEST describes the 'Normative Pillar' within the institutional framework?
Which of the following BEST describes the 'Normative Pillar' within the institutional framework?
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What is the PRIMARY function of institutions, as described in the provided text?
What is the PRIMARY function of institutions, as described in the provided text?
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Which of the following is NOT considered a primary driver of economic development?
Which of the following is NOT considered a primary driver of economic development?
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Which of the following is NOT a type of Totalitarianism?
Which of the following is NOT a type of Totalitarianism?
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Which of the following is a consequence of 'bounded rationality' as referenced in the content?
Which of the following is a consequence of 'bounded rationality' as referenced in the content?
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Which of these is an example of a 'non-market' strategy?
Which of these is an example of a 'non-market' strategy?
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Which of the following BEST describes the concept of 'institutional transitions'?
Which of the following BEST describes the concept of 'institutional transitions'?
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What is the purpose of 'institutional work' as described in the content?
What is the purpose of 'institutional work' as described in the content?
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Study Notes
Institutions and Economic Systems
- Institutions: Humanly devised constraints structuring human interaction. These define the "rules of the game."
- Institutional Transitions: Significant changes to formal and informal rules impacting firms.
- Institution-Based View: A prominent perspective in global business, emphasizing how institutions enable or constrain firm success. This view focuses on the dynamic interplay between institutions and firms.
- Formal Institutions: Politics, laws, and economics.
- Informal Institutions: Culture, ethics, norms.
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Institutional Framework: Formal and informal institutions governing individual and firm behavior. This framework consists of three pillars:
- Regulatory Pillar: Government's coercive power.
- Normative Pillar: Influence of norms on individual and firm behavior.
- Cognitive Pillar: Internalized values and beliefs guiding behavior.
- Uncertainty Reduction: Institutions play a key role in reducing uncertainty.
- Force Majeure: A legal doctrine excusing debtors during natural disasters or calamities.
- Transaction Costs: Costs associated with economic transactions, or "the cost of doing business."
- Opportunism: Seeking self-interest through misleading or deceitful behavior.
Institutional Issues and Strategies
- Rational Firm Behavior: Firms pursue self-interest within institutional constraints.
- Bounded Rationality: Rational decision-making limitations due to incomplete information.
- Nonmarket (Political) Strategy: Using political and social relationships to achieve goals.
- Institutional Work: Creating, maintaining, or disrupting institutions.
Political Systems
- Political System: Rules governing a country's political governance.
- Political Risks: Risks associated with political changes negatively impacting businesses.
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Political System Types:
- Democracy: Citizens elect representatives.
- Totalitarianism: One person or party controls the population (various types exist- communist, right-wing, theocratic, tribal).
- Authoritarianism: Political plurality is suppressed, and concentrated government power prevails.
Legal Systems and Property Rights
- Legal System: Rules on how a country's laws are created and enforced.
- Civil Law: Legal system using comprehensive statutes as a basis for judgements.
- Common Law: Legal system shaped by precedents.
- Theocratic Law: Legal system based on religious teachings.
- Property Rights: Legal right to use and benefit from an economic resource.
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Intellectual Property Rights (IPR): Rights related to owned intellectual property.
- Patents: Exclusive rights for new inventions.
- Copyrights: Exclusive rights for authors and publishers.
- Trademarks: Exclusive rights for brand names and designs.
- Piracy: Unauthorized use of intellectual property.
Economic Systems
- Economic System: Rules governing a country's economic governance.
- Market Economy: Economy based on market forces.
- Command Economy: Economy controlled by government ownership and control.
- Mixed Economy: Economy combining market and command features.
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Description
Explore the critical role of institutions in shaping economic interactions and firm behavior. This quiz delves into formal and informal institutions, their transitions, and the institutional-based view in global business. Understand how different pillars of institutions influence individual and firm actions.
