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3 . The Institutional Context of Multinational Management -------------------------------Learning Objectives After reading this chapter you should be able to: • Understand the national context and how it affects the business environment. • Understand the influence of the institutional context of countries on individuals and organizations. • Define social institutions and understand their basic forms. • Explain how social institutions influence both people and organizations. • Describe the basic economic systems and their influence on multinational operations. • Understand the basic stages of industrialization and their implications for multinationals. • Discuss the world's basic religions and how they shape the local business environment. • Develop an understanding of education and its effects on multinational operations. • Define social inequality and its implications for multinationals. • Understand the importance of the national context and its connection with other international management areas. "Preview C A S E N p 0 N T Shell and Oil Drilling in Alaska Alaska's outer continental shelf includes many of the arctic wildlife wonders. The ocean surrounding the region includes vital migration routes for many species such as whales, walruses and other critical marine life. The ocean ecosystem is also viewed as one of the most unspoiled. However, in addition to its environmental wonders, Alaska holds around 27 billion barrels of recoverable oil under its continental shelf. Furthermore, Alaska is believed to contain around 130 trillion cubic inches of natural gas. The commercial potential of these resources is enormous, given the insatiable demand for fossil fuels such as oil and natural gas. Companies that are able to exploit such resources have the ability to earn significant returns on their invest-ments if the price of oil stays high. One of the oil companies preparing to start exploration of Alaska's outer continental shelf is the Dutch-based multinational Shell. After years of seeking all of the major permits, Shell can now start explor-atory drilling. Shell has not found obtaining the required permits to be easy. After taking two years to get the proper drilling permits, the BP Deepwater Horizon disaster struck and the U.S. Environmental Protection Agency decided to halt Shell's planned 2010 drilling. The governmental arm requested that Shell install some $60 million exhaust filtration equipment on its ships. Shell halted exploration in order to seek the appropriate permits. Obtaining the proper permits has taken significant time and resources for Shell. Shell officials argue that the regulatory process has been far too open-ended in their case. They have claimed that they found conflict-ing demands from different U.S. agencies and no clear final outcome.