INTERNATIONAL BUSINESS- LECTURE 3
Formal and Informal Institutions
Formal Institutions
Political Economy Definition
It is a term that stresses on the political, economic and legal
systems of a country working independently and the way they
interact with each other to affect the level of economic well being.
Property rights consideration
Managerial implications
Political Systems
A political system refers to the rules if the game and how the
country is governed.
o Political risk is the risk which is linked with the changing of the
political government with in a country, which may negatively
impact the foreign and local firms.
Dimensions according to which Political systems can be assessed-
Degree to which the political institution emphasizes on
collectivism or individualism.
Degree to which they are democratic or totalitarian.
Democracy- It is a system in which the people select the representatives
who govern the country on their behalf.
Totalitarianism(dictatorship)- It is a system in which a person or party
executes absolute control on the people.
Economic systems
It is a connection between the political ideology and the economic system
Free market economic system- A system where the individual goals
of the people are given primacy
State control of markets- a system where collective goals are given
primacy.
Legal system
Rules-laws- the regulate behavior
It is a process through which the laws are enforced and
grievances are redressed.
Three main types of Legal systems
Formal and Informal Institutions
Formal Institutions
Political Economy Definition
It is a term that stresses on the political, economic and legal
systems of a country working independently and the way they
interact with each other to affect the level of economic well being.
Property rights consideration
Managerial implications
Political Systems
A political system refers to the rules if the game and how the
country is governed.
o Political risk is the risk which is linked with the changing of the
political government with in a country, which may negatively
impact the foreign and local firms.
Dimensions according to which Political systems can be assessed-
Degree to which the political institution emphasizes on
collectivism or individualism.
Degree to which they are democratic or totalitarian.
Democracy- It is a system in which the people select the representatives
who govern the country on their behalf.
Totalitarianism(dictatorship)- It is a system in which a person or party
executes absolute control on the people.
Economic systems
It is a connection between the political ideology and the economic system
Free market economic system- A system where the individual goals
of the people are given primacy
State control of markets- a system where collective goals are given
primacy.
Legal system
Rules-laws- the regulate behavior
It is a process through which the laws are enforced and
grievances are redressed.
Three main types of Legal systems
