Law and Informal Institutions
International Business
Chapter 2 Review Questions
1. Name the one pillar that supports formal institutions and the two additional pillars that support informal institutions.
Answer: Regulatory Pillar that supports formal institutions and other two additional pillars name are Normative Pillar and Cognitive Pillar. Normative pillar refers to how to values, beliefs, and actions- collectively known as norms of other relevant players influence the behavior of focal individuals and firms. Cognitive pillar is the school support for informal institutions. It refers to the internalized values and beliefs that guide individual and firm behavior. 2. How does political risk affect global business?
Answer: Managers and firms rationally pursue their interests and make choices within the formal and informal constraints in a given institutional frame work. While formal and informal institutions combine to govern firm behavior, in situations where formal constrains are unclear or fail, informal constrains will play a larger role in reducing uncertainty and providing constancy to managers and firms. 3. Describe the differences among the three types of legal systems.
Answer: Three types of legal systems are Civil law, Common Law, and Theocratic Law. Civil Law is a tradition that uses comprehensive statutes and codes as a primary means to form legal judgments. Common law is A legal tradition that is shaped by precedents from previous judicial decisions. Theocratic law is a legal system based on religious teachings. 4. Name and describe the three economic systems. Which economic system is the most common and why?
Answer: Three economic systems are Market economy, command economy and Mixed economy. Market economy is an economy that is characterized by the “invisible hand” of market forces. Command Economy is an economy in which theoretically all factors of production are state owned and state controlled, and all supply, demand, and pricing are planned by
Chapter 2 Review Questions
1. Name the one pillar that supports formal institutions and the two additional pillars that support informal institutions.
Answer: Regulatory Pillar that supports formal institutions and other two additional pillars name are Normative Pillar and Cognitive Pillar. Normative pillar refers to how to values, beliefs, and actions- collectively known as norms of other relevant players influence the behavior of focal individuals and firms. Cognitive pillar is the school support for informal institutions. It refers to the internalized values and beliefs that guide individual and firm behavior. 2. How does political risk affect global business?
Answer: Managers and firms rationally pursue their interests and make choices within the formal and informal constraints in a given institutional frame work. While formal and informal institutions combine to govern firm behavior, in situations where formal constrains are unclear or fail, informal constrains will play a larger role in reducing uncertainty and providing constancy to managers and firms. 3. Describe the differences among the three types of legal systems.
Answer: Three types of legal systems are Civil law, Common Law, and Theocratic Law. Civil Law is a tradition that uses comprehensive statutes and codes as a primary means to form legal judgments. Common law is A legal tradition that is shaped by precedents from previous judicial decisions. Theocratic law is a legal system based on religious teachings. 4. Name and describe the three economic systems. Which economic system is the most common and why?
Answer: Three economic systems are Market economy, command economy and Mixed economy. Market economy is an economy that is characterized by the “invisible hand” of market forces. Command Economy is an economy in which theoretically all factors of production are state owned and state controlled, and all supply, demand, and pricing are planned by