IB - Module 3

opportunistic behaviour

taking disadvantage of another person's trust out of purely selfish reasons

institutional transitions

fundamental and comprehensive changes introduced to the formal and informal rulesof the game that affect organizations as players

institution-based view

firms and managers rationally pursue their interests and make choices within the given institutional framework; formal and informal institutions are combined to govern firm behaviour

formal institutions

political systems, economic systems, legal systems

political systems

systems of the rules of the game on how a country is governed politically; democracry, authoritarianism

political risk

risks associated with political changes that can negatively impact domestic and foreign firms

economic systems

rules of the game on how a country is governed economically; market economy, command economy

market economy

"invisible hand" of market forces exists

command economy

all factors of production are owned and controlled by the government or the state

the varieties-of-capitalism view

economies have different inherent logics of how markets coordinate economic activity

apprenticeship system

vocational training system for crafts and professions

legal systems

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

civil law

codified in books of law

common law

precedents and traditions shape legal tradition

case law

the rule of law that has been created by precedents of cases in court

intellectual property rights

patents, copyrights, trademarks

patents

legal rights awarded by government authorities to inventors of new technological ideas, who are given exclusive (monopoly) rights to derive income from such inventions

copyrights

exclusive legal rights of authors and publishers to publish and disseminate their work

trademarks

exclusive rights of firms to use specific names, brands and designs to differentiate their products from others

institutions (according to Douglas North)

humanly devised constraints that structure political, economic and social interaction

regulatory constraints

formal constraints that consist of formal rules, laws and agreements

normative constraints

half fromal, half informal constraints, that consist of informal expectations, attitudes, and transaction rules; they answer the question of how one should behave

cognitive constraints

informal constraints that consist of broadly shared convictions and cognitive structures; deeply ingrained ground rules

institutions (economists view)

reduce uncertainty; make transaction costs visible

institutions (sociologists view)

shape behaviour

institutional isomorphism

the processes that force a unit within a population to become more similar to other units with a similar institutional context

isomorphism types

coercive (through regulation), mimetic (through imitation), normative (through shared norms)

corporate governance

rules on how shareholders and other stakeholderscan control managers

institutional spheres

the state, the market, civil society

iron hand

corrective approach, rules result from rationalization and regulation of human activities; the state

invisible hand

competitive approach, rules result from free market of supply and demand; the market

intangible hand

cooperative approach, rules result from respect and esteem for, connectedness with, loyalty to the group

varieties of capitalism

Liberal Market Model (anglo-saxon model), Coordinated Market Model (social market model), Asian Model

path dependency

the dependence of economic outcomes on the path of previous outcomes; how history matters, and how it shapes the present

stages of economic development (Douglas North)

1. Trade within the village, 2. Trade beyond the village, 3. Long Distance Trade, 4. Urbanisation, 5. Modern Trade

institutional voids

gaps in the institutional framework; absence of intermediary firms; omissions in regulatory systems on which multinational companies depend

institutional development

process of turning less complex system into a more complex one

institutional transition

changing the system from one, to another type; shock therapy/gradual approach

shock therapy

rapid replacement, all at once (e.g. Poland, Russia)

gradual approach

emphasizes learning and slow adaptation (e.g. China, Vietnam)