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gb10 - A Unified Framework for Discussing Global Business...

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A Unified Framework for Discussing Global Business The biggest complaints most students of international business have is that the large amount of information makes it difficult to see the big picture. Throughout the textbook, we will focus on a single question: “What determines the success and failure of firms around the globe?” To answer this question, we will consider two points of view: The Institution-Based View This view holds that institutions—the “rules of the game”— determine a firm’s success or failure. Firms operating around the globe must do their homework and thoroughly understand these rules, which can be formal or informal. --Formal rules: Formal rules are explicitly stated in the country’s laws. For example, Hong Kong is well known for having laws that treat all firms—foreign and domestic—equally. Other countries, on the other hand, may discriminate against foreign firms. For example, before the reforms of the early 1990s, India had rules that strongly discouraged foreign firms from doing business there.
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