chapter 03 international institutions from an international business perspective mcgraw-hill/irwin...
TRANSCRIPT
Chapter 03
International Institutions from an International Business Perspective
McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.
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What are Institutions and Why are They Useful?
• Organizations of groups, societies, or cultures to achieve a common goal: “to provide stability and meaning to social life”
• Organizations of groups, societies, or cultures to achieve a common goal: “to provide stability and meaning to social life”
• A collection of norms that “regulate the relations of individuals to each other”
• A collection of norms that “regulate the relations of individuals to each other”
Institutions are socially constructed, limit Institutions are socially constructed, limit behavior, and behavior, and set the rules of the game!set the rules of the game!
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Institutions Influence Behavior
• New Institutional Theory– Social
Constructs – norms that structure relations between people
• New Institutional Theory– Social
Constructs – norms that structure relations between people
• Formal Institutions– Influence behavior
through laws and regulations
• Formal Institutions– Influence behavior
through laws and regulations
• Informal Institutions– Influence behavior
through norms, values, customs regulations
• Informal Institutions– Influence behavior
through norms, values, customs regulations
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Institutions Influence Behavior
• New Institutional Theory:– Societal
Expectations: basic rules & social expectations of groups or organizations – written and unwritten
• New Institutional Theory:– Societal
Expectations: basic rules & social expectations of groups or organizations – written and unwritten
• Formal Institutions:– City, State, and National
Governments, EU– Operate through Laws & Rules
• Formal Institutions:– City, State, and National
Governments, EU– Operate through Laws & Rules
• Informal Institutions:– Normative – set Standards:
NGOs & Professional Organizations
– Cognitive – shared conceptual ideals
• Informal Institutions:– Normative – set Standards:
NGOs & Professional Organizations
– Cognitive – shared conceptual ideals
Examples
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Institutions Influence Behavior• Formal Institutions
– Tax Laws, Speed Limits– Membership Rules
• Formal Institutions– Tax Laws, Speed Limits– Membership Rules
• Informal Institutions– Normative
• Organizational standards & Principles
– Cognitive:• Function as frameworks for behavior
China – guanxi Japan – “supplier game”
• Informal Institutions– Normative
• Organizational standards & Principles
– Cognitive:• Function as frameworks for behavior
China – guanxi Japan – “supplier game”
Examples
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The United Nations (UN)• 192 member countries
dedicated to world peace and stability
• Fosters global business relationships
• Helps write international law
• Helps stabilize global economy
• Headquartered in New York City
• 192 member countries dedicated to world peace and stability
• Fosters global business relationships
• Helps write international law
• Helps stabilize global economy
• Headquartered in New York City
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The UN Impacts IB
• UN Center for Trade Facilitation and Electronic Business (UN/CEFACT) – Sets technical
standards and norms– Standardized trade
documents– Standards for E-data
exchange
• UN Center for Trade Facilitation and Electronic Business (UN/CEFACT) – Sets technical
standards and norms– Standardized trade
documents– Standards for E-data
exchange
• UN Educational, Scientific and Cultural Organization (UNESCO)– Investment in
emerging economies– Development in
health, education, governance & political stability
• UN Educational, Scientific and Cultural Organization (UNESCO)– Investment in
emerging economies– Development in
health, education, governance & political stability
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The UN Impacts IB
• UN Agencies a deal with downsides to globalization:– Terrorism– Crime– Drugs– Arms Traffic
• UN Agencies a deal with downsides to globalization:– Terrorism– Crime– Drugs– Arms Traffic
• UN Environmental Programme (UNEP)– Climate control
Convention– Kyoto Protocol– Sustainable
Business Practices
• UN Environmental Programme (UNEP)– Climate control
Convention– Kyoto Protocol– Sustainable
Business Practices
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The UN Impacts IB
• UN Addresses Global Education & Health– The Global Compact
Education and healthissues w/ privateindustry/developingnation partnerships
• UN Addresses Global Education & Health– The Global Compact
Education and healthissues w/ privateindustry/developingnation partnerships
• UN Economic and Social Council promotes:– Social Justice– Human Rights– Labor Rights
• UN Economic and Social Council promotes:– Social Justice– Human Rights– Labor Rights
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The UN and the Conduct of Global Business
• Ships sail protected across international waters.• Commercial airlines fly across borders and land in
emergencies – International Civil Aviation Organization.• WHO sets quality standards for drug names and quality.• Universal Postal Union protects mail and allows cross-border
mailing.• International Telecommunications Union keeps airwaves
unclogged and avoids radio interference.• World Meteorological Organization shares global weather
data.• UN Sales Convention and UN Convention on Carriage of
Goods by Sea set rights and obligations of international buyers/sellers.
• Ships sail protected across international waters.• Commercial airlines fly across borders and land in
emergencies – International Civil Aviation Organization.• WHO sets quality standards for drug names and quality.• Universal Postal Union protects mail and allows cross-border
mailing.• International Telecommunications Union keeps airwaves
unclogged and avoids radio interference.• World Meteorological Organization shares global weather
data.• UN Sales Convention and UN Convention on Carriage of
Goods by Sea set rights and obligations of international buyers/sellers.
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International Monetary Institutions
• IMF – coordinates and enforces international monetary rules
• IMF – coordinates and enforces international monetary rules
• World Bank – lends money for development projects
• World Bank – lends money for development projects
Established in 1944 at Bretton Woods Established in 1944 at Bretton Woods by treasury and central bank by treasury and central bank
representatives from the Allied representatives from the Allied Nations of WWIINations of WWII
Established in 1944 at Bretton Woods Established in 1944 at Bretton Woods by treasury and central bank by treasury and central bank
representatives from the Allied representatives from the Allied Nations of WWIINations of WWII
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IMF• Basic Premise:
– all nations seek a workable international monetary system which transcends their conflicting national interests
• Basic Premise: – all nations seek a
workable international monetary system which transcends their conflicting national interests
• IMF Promotes– International
monetary cooperation
– Orderly exchange and payment systems
– Available funds for BOP corrections
• IMF Promotes– International
monetary cooperation
– Orderly exchange and payment systems
– Available funds for BOP corrections
Each of the 186 members contribute Each of the 186 members contribute funds based on the country’s relative funds based on the country’s relative
size size in the world economy. in the world economy.
These funds are called “quotas.”These funds are called “quotas.”
Each of the 186 members contribute Each of the 186 members contribute funds based on the country’s relative funds based on the country’s relative
size size in the world economy. in the world economy.
These funds are called “quotas.”These funds are called “quotas.”
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The World Bank• 2 Major
Institutions:– International Bank for
Reconstruction and Development (IBRD)
– International Development Association (IDA)
• 2 Major Institutions:– International Bank for
Reconstruction and Development (IBRD)
– International Development Association (IDA)
• 3 Minor Institutions:– International Finance
Corporation (IFC)– Multilateral Investment
Guarantee Agency (MIGA)
– International Center for the Settlement of Investment Disputes (ICSID)
• 3 Minor Institutions:– International Finance
Corporation (IFC)– Multilateral Investment
Guarantee Agency (MIGA)
– International Center for the Settlement of Investment Disputes (ICSID)
A World Education Bank to set up A World Education Bank to set up primary schools and train teachers primary schools and train teachers
was called for in 2008was called for in 2008
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WTO• Deals with rules of
trade between nations:– Established in 1995– 153 members set and
implement trade rules between nations
– Goal: Reduce or eliminate trade barriers and restrictions
– Minimize government action against trade
• Deals with rules of trade between nations:– Established in 1995– 153 members set and
implement trade rules between nations
– Goal: Reduce or eliminate trade barriers and restrictions
– Minimize government action against trade
• WTO Principles:1. Trade without
discrimination (MFN Principle)
2. Freer trade through negotiation
3. Predictability through binding and transparency
4. Promoting fair competition
5. Encouraging development and economic reform
• WTO Principles:1. Trade without
discrimination (MFN Principle)
2. Freer trade through negotiation
3. Predictability through binding and transparency
4. Promoting fair competition
5. Encouraging development and economic reform
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Economics Integration Agreements
• Free Trade Area (FTA) – tariffs among members eliminated but external tariffs remain
• Free Trade Area (FTA) – tariffs among members eliminated but external tariffs remain
• Customs Union – collaboration that adds common external tariffs to an FTA
• Customs Union – collaboration that adds common external tariffs to an FTA
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The details are on
pages 53 to 55 in the text.
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Economics Integration Agreements
• Common Market – customs union that includes mobility of services, people, and capital within a union
• Common Market – customs union that includes mobility of services, people, and capital within a union
• Complete Economic Integration – integration on economic and political levels
• Complete Economic Integration – integration on economic and political levels
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The details are on
pages 53 to 55 in the text.
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The European Union• EU Development
– 27 European countries committed to economic and political integration
– Established in 1993 by the EC in the Maastricht Treaty
• 3 Areas of Integration:1. Economic Community2. Foreign Policy3. Domestic Affairs
• EU Development– 27 European countries
committed to economic and political integration
– Established in 1993 by the EC in the Maastricht Treaty
• 3 Areas of Integration:1. Economic Community2. Foreign Policy3. Domestic Affairs
• EU Profile Today:– 27 member
countries– 500+ million people– 7.3%+ of World
population– 20% of global
imports & exports– Supranational body
with regional government
• EU Profile Today:– 27 member
countries– 500+ million people– 7.3%+ of World
population– 20% of global
imports & exports– Supranational body
with regional government
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EU Impact on IB• The Changes:
– Harmonized national standards, labeling laws, testing procedures & consumer protection issues
– Eliminated shared border taxes and customs laws of member nations
– Common currency – the €
• The Changes:– Harmonized national
standards, labeling laws, testing procedures & consumer protection issues
– Eliminated shared border taxes and customs laws of member nations
– Common currency – the €
• The Results:– The World’s largest
trading economy– FDI outflow = 26% of
World output– Cost of Doing Business
in EU is reduced– EU regs set new global
standards
• The Results:– The World’s largest
trading economy– FDI outflow = 26% of
World output– Cost of Doing Business
in EU is reduced– EU regs set new global
standards
EU market access means firms play by EU market access means firms play by ER rules globally AND within the EU! ER rules globally AND within the EU!
EU market access means firms play by EU market access means firms play by ER rules globally AND within the EU! ER rules globally AND within the EU!
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