Chapter 1: Globalizing Business

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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. 2 / 4

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. 3 / 4

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.

oRegulatory pillar: The coercive power of governments.

Informal institution: Institution represented by cultures, ethics, and norms.oNormative pillar: The mechanism through which norms influence individual and firm behaviour.oCognitive 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.oCommunist totalitarianism centers on a communist party.oRight-wing totalitarianism is characterized by its intense hatred against communism. One party restricts political freedom, arguing that such freedom would lead to communism.oTheocratic totalitarianism refers to the monopolization of political power in the hands of one religious party or group oTribal 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.

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