ge12 - REVIEW QUESTION ANSWERS FOR CHAPTER 5 1. Name and...

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REVIEW QUESTION ANSWERS FOR CHAPTER 5 1. Name and describe the one pillar that supports formal institutions and the two additional pillars that support informal institutions. The formal and primary pillar is the regulatory pillar: it is the coercive power of governments. The informal pillars consist of the following: (1) the cognitive pillar which refers to the internalized, taken-for-granted values and beliefs that guide individual and firm behavior and the normative pillar which refers to how the values, beliefs, and actions of other relevant players—collectively known as norms —influence the behavior of focal individuals and firms. 2. In what ways do institutions influence individuals’ and firms’ behaviors? Explain your answer. Institutional framework is made up of formal and informal institutions governing individual and firm behavior. Institution-based views require firms to constantly monitor, decode, and adapt to the changing rules of the game to survive and prosper. 3. Define institutional transitions, and give three examples of where they can be found. Institutional transitions are defined as “fundamental and comprehensive changes introduced to the formal and informal rules of the game that affect organizations as players.” China, Poland, and Russia are among the emerging economies moving from central planning to market competition. 4. Explain the two core propositions behind the institution-based view of global business. First, managers and firms rationally pursue their interests and make choices within institutional constraints. Second, formal and informal institutions combine to govern firm behavior but where formal constraints are unclear or fail; informal constraints play a larger role. 5. Which are generally more significant: formal or informal constraints? Explain your answer. In situations where formal constraints are unclear or fail, informal constraints play a larger role in reducing uncertainty and providing constancy to managers and firms. 6. What fundamental aspect of democracy is relevant to the effective conduct of global business? A fundamental aspect of democracy that is relevant to the effective conduct of global business is an individual’s right to freedom of expression and organization. In most modern democracies, this right to organize economically has not only been extended to domestic individuals and firms but also to foreign individuals and firms that come to do business. 7.
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ge12 - REVIEW QUESTION ANSWERS FOR CHAPTER 5 1. Name and...

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