IB 385 Peng Chapter 2 (Formal Institutions)

IB 385 Peng Chapter 2 (Formal Institutions) - FORMAL AND...

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Unformatted text preview: FORMAL AND INFORMAL INSTITUTIONS institutions - formal and informal policies popularly known as “the rules of the game” institution-based view - leading perspective on global business in which firms constantly monitor, decode, and adapt to the changing rules of the game to survive and prosper FORMAL AND INFORMAL INSTITUTIONS institutional framework - formal and informal institutions governing individual and firm behavior formal institutions - laws, regulations, and rules regulatory pillar - coercive power of governments FORMAL AND INFORMAL INSTITUTIONS informal institutions - institutions represented by norms, cultures, and ethics normative pillar - how the values, beliefs, and actions of other relevant players - collectively known as norms - influence the behavior of focal individuals and firms cognitive pillar - internalized, taken-for-granted values and beliefs that guide individual and firm behavior WHAT DO INSTITUTIONS DO? key role is to reduce uncertainty by influencing individuals’ and firms’ decision making by signaling which conduct is legitimate and acceptable and which is not transaction costs - costs associated with economic transactions, costs of doing business opportunism - self-interest seeking with guile institutional transitions - fundamental and comprehensive changes introduced to the formal and informal rules of the game that affect organizations as players POLITICAL SYSTEMS...
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IB 385 Peng Chapter 2 (Formal Institutions) - FORMAL AND...

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