,Chapter 1: Globalizing Business
International Business: A Business (firm) that engages in international (cross-border) economic
activities, and/or the action of doing business abroad.
Multinational enterprise (MNE): A firm that engages in foreign direct investment (FDI).
Foreign direct investment (FDI): Investment in, controlling, and managing value-added activities in
other countries.
Emerging economies/market: Developing countries.
Gross domestic product (GDP): The sum of value added by resident firms, households, and
governments operating in an economy.
Gross national product/income (GNP/GNI): GDP plus income from non-resident sources abroad.
Purchasing power parity (PPP): A conversion that determines the equivalent amount of goods and
services that different currencies can purchase.
,Reverse innovation: An innovation that is adopted first in emerging economies and is then diffused
around the world.
Expatriate manager (expat): A manager who works abroad.
International premium: A significant pay raise when working overseas.
Liability of foreignness: The inherent disadvantage that foreign firms experience in host countries
because of their non-native status.
Risk management: The identification and assessment of risks and the preparation to minimize the
impact of high-risk, unfortunate events.
Scenario planning: A technique to prepare and plan for multiple scenarios (either high- or low-risk).
Semiglobalization: A perspective that suggests that barriers to market integration at borders are
high, but not high enough to insulate countries from each other completely.
, Chapter 2: Understanding Formal Institutions: Politics, Laws, and
Economics
Institutional transition: Fundamental and comprehensive changes introduced to the formal and
informal rules of the game that affect firms as players.
Institution-based view: A leading perspective in global business that suggests that the success and
failure of firms are enabled and constrained by institutions.
Institutions: Formal and informal rules of the game.
Institutional framework: Formal and informal institutions that govern individual and firm behaviour.
Formal institution: Institution represented by laws, regulations, and rules.
o Regulatory pillar: The coercive power of governments.
Informal institution: Institution represented by cultures, ethics, and norms.
o Normative pillar: The mechanism through which norms influence individual and firm
behaviour.
o Cognitive pillar: The internalized (or taken-for-granted) values and beliefs that guide
individual and firm behaviour.
Norms: Values, beliefs, and actions of relevant players that influence the focal individuals and firms.
Transaction cost: The cost associated with economic transactions or, more broadly, the costs of
doing business.
Opportunism: The act of seeking self-interest with guile.
Transition economies: A subset of emerging economies, particularly those moving from central
planning to market competition. (e.g. China, Poland, Russia, and Vietnam)
Bounded rationality: The necessity of making rational decisions in the absence of complete
information.
Political system: The rules of the game on how a country is governed politically.
Democracy: A political system in which citizens elect representatives to govern the country
on their behalf.
Totalitarianism (dictatorship): A political system in which one person or party exercises
absolute political control over the population.
o Communist totalitarianism centers on a communist party.
o Right-wing totalitarianism is characterized by its intense hatred against
communism. One party restricts political freedom, arguing that such freedom would
lead to communism.
o Theocratic totalitarianism refers to the monopolization of political power in the
hands of one religious party or group
o Tribal totalitarianism refers to one tribe or ethnic group monopolizing political
power and oppressing other tribes or ethnic groups.
Political risk: Risk associated with political changes that may negatively impact domestic and foreign
firms.
International Business: A Business (firm) that engages in international (cross-border) economic
activities, and/or the action of doing business abroad.
Multinational enterprise (MNE): A firm that engages in foreign direct investment (FDI).
Foreign direct investment (FDI): Investment in, controlling, and managing value-added activities in
other countries.
Emerging economies/market: Developing countries.
Gross domestic product (GDP): The sum of value added by resident firms, households, and
governments operating in an economy.
Gross national product/income (GNP/GNI): GDP plus income from non-resident sources abroad.
Purchasing power parity (PPP): A conversion that determines the equivalent amount of goods and
services that different currencies can purchase.
,Reverse innovation: An innovation that is adopted first in emerging economies and is then diffused
around the world.
Expatriate manager (expat): A manager who works abroad.
International premium: A significant pay raise when working overseas.
Liability of foreignness: The inherent disadvantage that foreign firms experience in host countries
because of their non-native status.
Risk management: The identification and assessment of risks and the preparation to minimize the
impact of high-risk, unfortunate events.
Scenario planning: A technique to prepare and plan for multiple scenarios (either high- or low-risk).
Semiglobalization: A perspective that suggests that barriers to market integration at borders are
high, but not high enough to insulate countries from each other completely.
, Chapter 2: Understanding Formal Institutions: Politics, Laws, and
Economics
Institutional transition: Fundamental and comprehensive changes introduced to the formal and
informal rules of the game that affect firms as players.
Institution-based view: A leading perspective in global business that suggests that the success and
failure of firms are enabled and constrained by institutions.
Institutions: Formal and informal rules of the game.
Institutional framework: Formal and informal institutions that govern individual and firm behaviour.
Formal institution: Institution represented by laws, regulations, and rules.
o Regulatory pillar: The coercive power of governments.
Informal institution: Institution represented by cultures, ethics, and norms.
o Normative pillar: The mechanism through which norms influence individual and firm
behaviour.
o Cognitive pillar: The internalized (or taken-for-granted) values and beliefs that guide
individual and firm behaviour.
Norms: Values, beliefs, and actions of relevant players that influence the focal individuals and firms.
Transaction cost: The cost associated with economic transactions or, more broadly, the costs of
doing business.
Opportunism: The act of seeking self-interest with guile.
Transition economies: A subset of emerging economies, particularly those moving from central
planning to market competition. (e.g. China, Poland, Russia, and Vietnam)
Bounded rationality: The necessity of making rational decisions in the absence of complete
information.
Political system: The rules of the game on how a country is governed politically.
Democracy: A political system in which citizens elect representatives to govern the country
on their behalf.
Totalitarianism (dictatorship): A political system in which one person or party exercises
absolute political control over the population.
o Communist totalitarianism centers on a communist party.
o Right-wing totalitarianism is characterized by its intense hatred against
communism. One party restricts political freedom, arguing that such freedom would
lead to communism.
o Theocratic totalitarianism refers to the monopolization of political power in the
hands of one religious party or group
o Tribal totalitarianism refers to one tribe or ethnic group monopolizing political
power and oppressing other tribes or ethnic groups.
Political risk: Risk associated with political changes that may negatively impact domestic and foreign
firms.
