Understanding Formal Institutions: Politics, Laws, And Economics Vocabulary

Front 1

Institutions

Back 1

“rules of the game”

Front 2

Institutional transitions

Back 2

Fundamental and comprehensive changes introduced to formal and informal rules of the game that affect firms as players

Front 3

Institution-based view

Back 3

success and failure of firms are enabled and constrained by institutions

Front 4

Institutional framework

Back 4

Formal and informal institutions governing individual and firm behavior

Front 5

Formal institutions

Back 5

Laws, regulations, and rules -may be imposed by home countries and host countries

Front 6

Norms

Back 6

Values, beliefs, and actions

Front 7

Regulatory pillar

Back 7

Coercive power of governments

Front 8

Normative pillar

Back 8

How values, beliefs, and actions of other relevant players influence behavior of focal individuals and firms

Front 9

Cognitive pillar

Back 9

Internalized, or taken for-granted, values and beliefs that guide individual and firm, or group, behavior

Front 10

Transaction costs

Back 10

Costs associated with economic transactions or, the costs of doing business

Front 11

Opportunism

Back 11

Act of seeking self-interest with guile

Front 12

Political system

Back 12

Rules of the game on how a country is governed politically

Front 13

Political risk

Back 13

Risk associated with political changes that may negatively impact domestic and foreign firms

Front 14

Democracy

Back 14

System in which citizens elect representatives to govern the country on their behalf

Front 15

Totalitarianism
(dictatorship)

Back 15

System in which one person or party exercises absolute political control over the population

Front 16

Legal system

Back 16

Rules of the game on how a country’s laws are enacted and enforced

Front 17

Civil law

Back 17

Comprehensive statutes and codes as a primary means to form legal judgments

Front 18

Common law

Back 18

English origin, shaped by precedents and traditions from previous judicial decisions

Front 19

Theocratic law

Back 19

Based on religious teachings

Front 20

Property rights

Back 20

Legal rights to use an economic property (resource) and derive income and benefits from it

Front 21

Intellectual property

Back 21

Intangible property the result of intellectual activity

Front 22

Intellectual property rights (IPR)

Back 22

Rights associated with ownership of intellectual property

Front 23

Patent

Back 23

Legal rights awarded by government authorities to inventors of new products or processes

Front 24

Copyright

Back 24

Exclusive legal rights of authors and publishers to publish and disseminate their work

Front 25

Trademark

Back 25

Exclusive legal rights of firms to use specific names, brands, and designs to differentiate their products from others

Front 26

Economic system

Back 26

Rules of the game on how a country is governed economically

Front 27

Market economy

Back 27

Characterized by the “invisible hand” of market forces; government takes a hands-off, or laissez faire, approach

Front 28

Command economy

Back 28

Government taking the “commanding height” in the economy; all factors of production are government-or state owned and controlled, and all supply, demand, and pricing are planned by the government

Front 29

Mixed economy

Back 29

Elements of both market economy and command economies

Front 30

Washington Consensus

Back 30

View centered on unquestioned belief in the superiority of private ownership over state ownership in economic policy making spearheaded by the International Monetary Fund and the World Bank

Front 31

Moral hazard

Back 31

Recklessness when people and organizations (including firms and governments) do not have to face the full consequences of their actions