IB - Module 3

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opportunistic behaviour
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taking disadvantage of another person's trust out of purely selfish reasons
institutional transitions
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fundamental and comprehensive changes introduced to the formal and informal rulesof the game that affect organizations as players
institution-based view
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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
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political systems, economic systems, legal systems
political systems
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systems of the rules of the game on how a country is governed politically; democracry, authoritarianism
political risk
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risks associated with political changes that can negatively impact domestic and foreign firms
economic systems
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rules of the game on how a country is governed economically; market economy, command economy
market economy
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"invisible hand" of market forces exists
command economy
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all factors of production are owned and controlled by the government or the state
the varieties-of-capitalism view
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economies have different inherent logics of how markets coordinate economic activity
apprenticeship system
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vocational training system for crafts and professions
legal systems
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the rules of the game on how a country's laws are enacted and enforced
civil law
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codified in books of law
common law
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precedents and traditions shape legal tradition
case law
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the rule of law that has been created by precedents of cases in court
intellectual property rights
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patents, copyrights, trademarks
patents
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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
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exclusive legal rights of authors and publishers to publish and disseminate their work
trademarks
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exclusive rights of firms to use specific names, brands and designs to differentiate their products from others
institutions (according to Douglas North)
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humanly devised constraints that structure political, economic and social interaction
regulatory constraints
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formal constraints that consist of formal rules, laws and agreements
normative constraints
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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
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informal constraints that consist of broadly shared convictions and cognitive structures; deeply ingrained ground rules
institutions (economists view)
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reduce uncertainty; make transaction costs visible
institutions (sociologists view)
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shape behaviour
institutional isomorphism
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the processes that force a unit within a population to become more similar to other units with a similar institutional context
isomorphism types
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coercive (through regulation), mimetic (through imitation), normative (through shared norms)
corporate governance
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rules on how shareholders and other stakeholderscan control managers
institutional spheres
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the state, the market, civil society
iron hand
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corrective approach, rules result from rationalization and regulation of human activities; the state
invisible hand
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competitive approach, rules result from free market of supply and demand; the market
intangible hand
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cooperative approach, rules result from respect and esteem for, connectedness with, loyalty to the group
varieties of capitalism
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Liberal Market Model (anglo-saxon model), Coordinated Market Model (social market model), Asian Model
path dependency
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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)
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1. Trade within the village, 2. Trade beyond the village, 3. Long Distance Trade, 4. Urbanisation, 5. Modern Trade
institutional voids
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gaps in the institutional framework; absence of intermediary firms; omissions in regulatory systems on which multinational companies depend
institutional development
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process of turning less complex system into a more complex one
institutional transition
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changing the system from one, to another type; shock therapy/gradual approach
shock therapy
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rapid replacement, all at once (e.g. Poland, Russia)
gradual approach
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emphasizes learning and slow adaptation (e.g. China, Vietnam)

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