SUMMARY OF THE LATEST TEXTBOOK (Peng Mike, 2019), according to the 2020 STUDY GUIDE.
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International Business. 3rd Edition. Peng M Mike. 2019
Written in 2020
,Chapter 1:
Globalisation and international business:
1.1 Explain what is globalisation?
Globalisation is a process leading to greater interdependence and mutual awareness
among economic political and social units in the world, and among actors in general.
1.2 Explain implications of the globalisation for business?
• Think global
• Think local
• Integrate your global and local knowledge
• Communicate effectively with those who are not in the global jet set
Ethnocentric perspective= World through the lens of one's own culture.
Not invented here syndrome= the tendency to distrust new ideas coming from outside of
one's own organisation or community.
1.3 Identify one fundamental question and two core perspectives that provide a
framework for studying the global business field.
Fundamental question= what determines the success and failure of firms around the
globe?
Institution based view= formal and informal rules of the game.
Institution based to view suggests that success and failure of firms are enabled and
constrained by the different rules of the game.
Some formal rules of the game, such as the requirements to treat a domestic and foreign
firms as equals, would enhance the potential odds for foreign firms success.
Informal rules such as culture, norms and values.
Deals mainly with the external environment.
Resource based view= firm specific resources and capabilities.
Resource based view focuses on affirms internal resources and capabilities.
Liability of ownership= the inherence in disadvantage that outsiders experience in a new
environment because of the lack of familiarity.
• Distant origins
• Lack of local experience
• Lack of nearby experience
= lack of familiarity, networks and legitimacy in the local context
, = liability of outsidership.
1.4 Discuss the current trends in globalisation.
1. Population trends:
Decreasing population in developed countries, while increasing population in developing
countries, and increased life expectancy.
2. Science and technology:
Includes the internet and their computer components as well as GPS, genetically
modified food.
3. Increasing integration and interdependence:
Includes all areas of economic life as well as an increasing exchange of products and
services across national borders through trade.
4. Governance:
How national and international laws govern the economic activity and transnational
institutions.
, Chapter 2:
Formal Institutions: Political, economic and legal systems:
2.1 Explain the concept of institutions and their role in reducing uncertainty.
Formal institutions= institutions represented by laws regulations and rules.
Informal institutions= rules that are not formalised but that exist in for example norms and
values and ethics.
Institutions can also be classified according to 3 pillars identified by W Richards Scott.
1. Regulatory pillar: reflects the coercive power of government and largely corresponds
to formal institutions.
2. Normative pillar: refers to how the norms, values, beliefs and actions of other relevant
players influence the behaviour of focal individuals and firms.
3. Cognitive pillar: refers to the internalised taken for granted assumptions of how the
world works that guide individual and firm behaviour.
Institutions influence individuals and firms decision-making by signalling want conduct is
legitimate and acceptable and what is.
• Political uncertainty such as the possibility of expropriation, my ringer long-term
planning obsolete.
• Economic uncertainty such as volatile exchange rates or high inflation makes it difficult
to predict return on investments.
• Behavioural uncertainty such as fear that a partner may fail to carry out obligations set
out in a contract may resulting economic losses. Uncertainty reduces peoples
willingness to take long-term commitments.
Two core propositions of the institution based view
Proposition one:
Managers and firms rationally pursue their interests and make choices within the formal
and informal constraints in a given institutional framework.
Proposition two:
Although formal and informal institutions combine to govern firm behaviour, in situations
where formal constraints our unclear or fail, informal constraints Will play a larger role in
reducing uncertainty and providing consistency to managers and firms.
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