Samenvatting International Business
Chapter 1: introduction
International Business (BI): the act of performing international economic activities, firms can
engage in two ways:
- Through contractual arrangements (e.g., exports)
- Foreign Direct Investment (FDI) firms that engage in FDI are Multinational
Enterprises (MNEs)
Emerging economies have started to undertake FDI but have also become a popular FDI
destination (western countries want to tap into the base of the pyramid)
(Biggest part of the world is poor)
What determines success of FDI around the globe?
Institution-based view = view that emphasizes the existence of formal and informal rules
across countries
Resource-based view = view that focuses on the specific resources of the firm internally
firms have an inherent disadvantage that outsiders experience in a new environment
(institutions pose a challenge to firms = liability to outsiders), to success due to this, firms
need to have superior resources
Liability to outsiders is caused by
1
,Globalization: a process leading to greater independence and mutual awareness among
economic, political, and social in the world (due to technological innovations, liberalization…)
there are however some negative things associated to globalization
Chapter 2: Formal Institutions
Institutions constitute the ‘rules of the game’ in a location, with 2 views:
- Formalization-based view (North):
Distinguishes between formal institutions (represented by laws, regulations, and
rules) and informal institutions (not written down but exist in norms, values and
ethics)
- Pillar-based view (Scott):
3 types of pillars:
1. Regulatory pillar: refers to the power of governments (authority to set and
enforce rules)
2. Normative pillar: the mechanism through which norms influence individual
and firm behavior people have a natural tendency to conform to the norm
3. Cognitive pillar: the internalized values and beliefs that guide individual and
firm behavior (unconscious)
Institutions matter because they reduce uncertainty for firms by signaling what behavior is
acceptable and what not help resolve certain situations such as cheating or a partner
seeking self-interest (which results in uncertainty and make people reluctant to engage in
transactions)
National systems of formal institutions:
1. Political systems:
Sets of rules specifying how countries are governed politically
- Democracies: citizen elect representatives to govern the country
mostly northern European countries have the best democracies, surprisingly USA
is very low on this list
- Autocracies: power is concentrated in the hands of one person or a small elite
(individual freedom is small) are regaining ground
Dimensions of governance quality:
1. Voice and accountability: the extent to which citizens can participate
2. Political stability: the likelihood of political instability and/or politically motivated
violence, including terrorism
3. Government effectiveness: quality of public services and the overall quality of the
political system
4. Regulatory quality: government’s ability to formulate and implement sound
policies and regulations to promote private sector development
5. Rule of law: quality of rules and enforcement of these rules
6. Control of corruption: extent to which public power is exercised for private gain
2
, 2. Economic systems:
Sets of rules specifying how national economies are governed
two extreme types:
- Pure market economy: the invisible hand determines supply and demand (laissez-
faire)
- Pure command economy: the state owns all production factors (no private
ownership, no market forces)
There are a lot of systems in between these types:
- Liberal market economies (LMEs): economic activity is mainly coordinated by market
forces (large stock markets)
- Coordinated market economies (CMEs): besides being coordinated by market forces,
economic activity is also substantially coordinated through other means such as
cooperation between firms, trade unions… (stock markets are also smaller)
LMEs are shareholder orientated (profit maximization) and CMEs stakeholder orientation
(not only profit maximization)
3. Legal systems:
Sets of rules specifying how laws are enacted and enforced within countries
two main legal traditions:
- Civil law: judgement is based on law drafted by the government
- Common law: judgments are based on pervious judicial decisions
Chapter 3: Informal Intuitions
Today’s goal: boosting you Cultural Intelligence (CQ) = the ability to understand and
understand
Developed in three phases:
1. Becoming aware that people from other countries have a different mindset
2. Becoming able to identify cultural differences
3. Becoming able to adapt to these differences
Key elements of informal institutions:
1. Culture: the collective programming of the mind that distinguishes the members of
one group or category of people from another
a. Cultural cluster: groups of countries with a similar culture
divide countries
b. Cultural dimensions: aspects along which the cultures of individual countries differ
from each other
Hofstede’s cultural dimensions:
- Power distance
- Uncertainty avoidance
- Individualism-collectivism
- Masculinity-Femininity
- Long-term vs. short-term orientation
Hall’s dimension:
- Low-context cultures: communication is taken at face value
- High-context cultures: communication relies a lot on the underlying unspoken
context
3
Chapter 1: introduction
International Business (BI): the act of performing international economic activities, firms can
engage in two ways:
- Through contractual arrangements (e.g., exports)
- Foreign Direct Investment (FDI) firms that engage in FDI are Multinational
Enterprises (MNEs)
Emerging economies have started to undertake FDI but have also become a popular FDI
destination (western countries want to tap into the base of the pyramid)
(Biggest part of the world is poor)
What determines success of FDI around the globe?
Institution-based view = view that emphasizes the existence of formal and informal rules
across countries
Resource-based view = view that focuses on the specific resources of the firm internally
firms have an inherent disadvantage that outsiders experience in a new environment
(institutions pose a challenge to firms = liability to outsiders), to success due to this, firms
need to have superior resources
Liability to outsiders is caused by
1
,Globalization: a process leading to greater independence and mutual awareness among
economic, political, and social in the world (due to technological innovations, liberalization…)
there are however some negative things associated to globalization
Chapter 2: Formal Institutions
Institutions constitute the ‘rules of the game’ in a location, with 2 views:
- Formalization-based view (North):
Distinguishes between formal institutions (represented by laws, regulations, and
rules) and informal institutions (not written down but exist in norms, values and
ethics)
- Pillar-based view (Scott):
3 types of pillars:
1. Regulatory pillar: refers to the power of governments (authority to set and
enforce rules)
2. Normative pillar: the mechanism through which norms influence individual
and firm behavior people have a natural tendency to conform to the norm
3. Cognitive pillar: the internalized values and beliefs that guide individual and
firm behavior (unconscious)
Institutions matter because they reduce uncertainty for firms by signaling what behavior is
acceptable and what not help resolve certain situations such as cheating or a partner
seeking self-interest (which results in uncertainty and make people reluctant to engage in
transactions)
National systems of formal institutions:
1. Political systems:
Sets of rules specifying how countries are governed politically
- Democracies: citizen elect representatives to govern the country
mostly northern European countries have the best democracies, surprisingly USA
is very low on this list
- Autocracies: power is concentrated in the hands of one person or a small elite
(individual freedom is small) are regaining ground
Dimensions of governance quality:
1. Voice and accountability: the extent to which citizens can participate
2. Political stability: the likelihood of political instability and/or politically motivated
violence, including terrorism
3. Government effectiveness: quality of public services and the overall quality of the
political system
4. Regulatory quality: government’s ability to formulate and implement sound
policies and regulations to promote private sector development
5. Rule of law: quality of rules and enforcement of these rules
6. Control of corruption: extent to which public power is exercised for private gain
2
, 2. Economic systems:
Sets of rules specifying how national economies are governed
two extreme types:
- Pure market economy: the invisible hand determines supply and demand (laissez-
faire)
- Pure command economy: the state owns all production factors (no private
ownership, no market forces)
There are a lot of systems in between these types:
- Liberal market economies (LMEs): economic activity is mainly coordinated by market
forces (large stock markets)
- Coordinated market economies (CMEs): besides being coordinated by market forces,
economic activity is also substantially coordinated through other means such as
cooperation between firms, trade unions… (stock markets are also smaller)
LMEs are shareholder orientated (profit maximization) and CMEs stakeholder orientation
(not only profit maximization)
3. Legal systems:
Sets of rules specifying how laws are enacted and enforced within countries
two main legal traditions:
- Civil law: judgement is based on law drafted by the government
- Common law: judgments are based on pervious judicial decisions
Chapter 3: Informal Intuitions
Today’s goal: boosting you Cultural Intelligence (CQ) = the ability to understand and
understand
Developed in three phases:
1. Becoming aware that people from other countries have a different mindset
2. Becoming able to identify cultural differences
3. Becoming able to adapt to these differences
Key elements of informal institutions:
1. Culture: the collective programming of the mind that distinguishes the members of
one group or category of people from another
a. Cultural cluster: groups of countries with a similar culture
divide countries
b. Cultural dimensions: aspects along which the cultures of individual countries differ
from each other
Hofstede’s cultural dimensions:
- Power distance
- Uncertainty avoidance
- Individualism-collectivism
- Masculinity-Femininity
- Long-term vs. short-term orientation
Hall’s dimension:
- Low-context cultures: communication is taken at face value
- High-context cultures: communication relies a lot on the underlying unspoken
context
3
