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Questions and Answers
What is a consequence of formal constraints being unclear or failing in business environments?
What is a consequence of formal constraints being unclear or failing in business environments?
How do democratic systems derive their legitimacy?
How do democratic systems derive their legitimacy?
What characterizes proportional representation in electoral systems?
What characterizes proportional representation in electoral systems?
In the context of political systems, what is identified as a major source of risk for businesses?
In the context of political systems, what is identified as a major source of risk for businesses?
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Which statement accurately differentiates between direct and indirect elections?
Which statement accurately differentiates between direct and indirect elections?
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What characterizes a representative democracy?
What characterizes a representative democracy?
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What is a potential downside of direct democracy?
What is a potential downside of direct democracy?
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How does authoritarianism typically affect individual freedoms?
How does authoritarianism typically affect individual freedoms?
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Which of the following is a characteristic of a market economy?
Which of the following is a characteristic of a market economy?
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What defines political risk in the context of business?
What defines political risk in the context of business?
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Which statement about lobbying is accurate?
Which statement about lobbying is accurate?
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In which type of political system can businesses influence legislative processes through non-market strategies?
In which type of political system can businesses influence legislative processes through non-market strategies?
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What is a common motivation behind contemporary authoritarian regimes?
What is a common motivation behind contemporary authoritarian regimes?
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What distinguishes a coordinated market economy (CME) from a liberal market economy (LME)?
What distinguishes a coordinated market economy (CME) from a liberal market economy (LME)?
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In a command economy, how are the factors of production managed?
In a command economy, how are the factors of production managed?
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Which of the following best describes the primary source of law in a common law system?
Which of the following best describes the primary source of law in a common law system?
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What method of coordination is primarily utilized in a liberal market economy?
What method of coordination is primarily utilized in a liberal market economy?
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Which legal system is characterized by detailed rules and comprehensive codes?
Which legal system is characterized by detailed rules and comprehensive codes?
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What role do apprenticeships play in a coordinated market economy?
What role do apprenticeships play in a coordinated market economy?
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In which legal system is contract design generally more free and detailed due to less comprehensive legislation?
In which legal system is contract design generally more free and detailed due to less comprehensive legislation?
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Which of the following statements about the government’s role in a capitalist economy is true?
Which of the following statements about the government’s role in a capitalist economy is true?
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What is a key characteristic of tacit knowledge?
What is a key characteristic of tacit knowledge?
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How does organizational knowledge differ from individual knowledge?
How does organizational knowledge differ from individual knowledge?
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What is one way MNEs can enable the flow of knowledge between subsidiaries?
What is one way MNEs can enable the flow of knowledge between subsidiaries?
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What is an example of reverse knowledge flow in MNEs?
What is an example of reverse knowledge flow in MNEs?
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What role do boundary spanners play in knowledge flow within an MNE?
What role do boundary spanners play in knowledge flow within an MNE?
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What characterizes a tight culture?
What characterizes a tight culture?
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How do cultural clusters function?
How do cultural clusters function?
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What is the primary focus of cultural distance?
What is the primary focus of cultural distance?
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Which statement best describes ethical relativism?
Which statement best describes ethical relativism?
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What does institutional distance refer to?
What does institutional distance refer to?
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Which option represents a consequence of cultural tightness-looseness in business contexts?
Which option represents a consequence of cultural tightness-looseness in business contexts?
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What principle guides ethical decision-making according to the content?
What principle guides ethical decision-making according to the content?
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What is a key characteristic of loose cultures?
What is a key characteristic of loose cultures?
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Study Notes
Political Systems
- Political systems determine the rules of a country's governance.
- Businesses interact with political systems indirectly, but must understand them as they shape commercial regulations.
- Political systems are a major source of risk for businesses.
Democracy
- Legitimacy stems from citizen elections.
- Variations:
- Proportional representation: Seats allocated based on party vote share (subject to thresholds).
- First-past-the-post: Candidate with the most votes in each constituency wins.
- Direct elections: Voters elect a president with executive power.
- Indirect elections: Voters elect representatives who select the government and prime minister.
- Representative democracy: Voters elect representatives to act on their behalf.
- Direct democracy: Voters directly vote on specific laws, offering more power but potential inconsistency.
- Centralization: While national government usually holds central power, local representatives and regional assemblies have varying degrees of authority.
Authoritarianism
- Power concentrated in the hands of one person.
- Limited freedom, submission to authority expected.
- Often driven by national objectives, ethnic nationalism, or perceived external threats.
Business and Politics
- Political systems influence:
- Who sets the rules and whose interests are reflected.
- How businesses can influence legislation through lobbying or corruption.
- Lobbying: Influencing political processes by expressing views to decision makers.
- Corruption: Abuse of public power for private gain.
- Non-market strategy: Influencing rules in host countries through political and social activities.
- Political systems vary in how often rules for businesses change, leading to political risk.
- Political risk: Potential negative impact of political changes on domestic and foreign firms.
Economic Systems
- Rules governing a country's economic operation.
- Prototypes are pure market and command economies, with various forms of capitalism in between.
Market Economy
- "Invisible hand" of market forces drives the economy.
- Factors of production are privately owned.
- Individuals free to engage in contracts.
- Government primarily provides services not offered by the private sector.
Command Economy
- Factors of production are government-owned and controlled.
- Government plans supply, demand, and pricing.
Varieties of Capitalism
- Different logics of market and economic activity coordination.
- Liberal market economy (LME):
- Coordination primarily through market signals.
- Companies financed through share sales, flexible labor markets, limited job protection.
- Coordinated market economy (CME):
- Coordination through various mechanisms beyond market signals.
- Greater legal protection for employees.
- Apprenticeship systems for vocational training.
- LME and CME elements are combined in various ways across countries.
Legal Systems
- Rules governing law enactment and enforcement.
Civil Law and Common Law
- Civil law:
- Uses comprehensive statutes and codes to form legal judgments.
- Contracts and codes of practice are typically brief, emphasizing employee and consumer protection.
- Common law:
- Shaped by precedents and traditions from judicial decisions.
- Primarily uses statutes, customs, and court decisions.
- Contracts are more detailed, with extensive use of lawyers.
- Case law: Rules established by precedents from court cases.
Legal Processes
- Civil law systems have detailed legal processes.
Cultural Tightness-Looseness
- Strength of social norms and degree of sanctioning.
- Tight cultures:
- Strict rules with punishments for violations.
- High degree of cultural homogeneity.
- Loose cultures:
- More open to new people, ideas, and change (e.g., US, Europe).
- Business implications:
- Affects expatriate effectiveness in foreign societies.
- Influences success of mergers and acquisitions between firms from different cultures.
National Cultural Differences
- Cultural clusters: Countries sharing similar cultures.
- Clustering can be based on shared religion or language.
Cultural and Institutional Distance
- Cultural distance: Difference between two cultures in values or subjective affinity.
- Institutional distance: Similarity or dissimilarity between the regulatory, normative, and cognitive institutions of two countries.
Debates and Extensions
- Informal institutions like norms and religion can lead to emotional debates.
Do Business Norms Travel?
- When working abroad, individuals may encounter unclear rules or conflicting norms. - Ethical considerations come into play.
Ethics
- Principles, standards, and norms governing individual and firm behavior.
- Addresses the question of "what is the right thing to do?"
Ethical Relativism
- All ethical standards are relative.
- "When in Rome, do as the Romans do."
Ethical Imperialism
- Belief in a single absolute ethical standard.
Practical Ethical Approach
- Respect human dignity and human rights.
- Companies often prioritize a "middle ground" approach that incorporates these principles.
Enabling Knowledge Flows Globally
- Traditional MNEs:
- Knowledge flows from HQ to subsidiaries.
- Parent company develops knowledge and transfers it for local adaptation.
- Codification makes knowledge explicit for transfer abroad.
Enabling Lateral Knowledge Flows
- Shared settings and platforms facilitate communication.
- Empowering boundary spanners (individuals with strong networks across business units).
- MNEs can benefit from reverse knowledge flows from subsidiaries to HQ.
Tacit Knowledge
- Knowledge acquired through experience and difficult to codify.
- Essential for understanding and adapting practices in different contexts.
Organizational Knowledge
- Knowledge held by an organization beyond individual members.
- More than the sum of individual knowledge, it is embedded in practices and routines.
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Description
This quiz explores the fundamentals of political systems and their influence on governance and business. It outlines different types of democracies, their electoral processes, and the implications for public participation. Understanding these concepts is crucial for grasping the relationship between politics and commerce.
