Notes on the book – International Business
Chapter 1
International business:
1) A business (firm) that engages in international (cross-border) economic activities,
and/or
2) The action of doing business abroad
Multinationals enterprise (MNE): A firm that engages in foreign direct investment
investment in, controlling, and managing value-added activities in other countries.
Emerging economy/markets: “developing country”
Purchasing Power Parity (PPP): A conversion that determines that equivalent amount of
goods and services that different currencies can purchase.
Gross Domestic Product (GDP): Sum of value added by resident firms, households and
governments operating in an economy.
Gross National Product (GNP): GDP plus income from non-resident sources abroad.
Gross National Income (GNI): GDP plus income from non-resident sources abroad. GNI is the
term used by the world bank and other international organizations to supersede the term
GNP.
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.
Globalization: The close integration of countries and peoples of the world.
Risk management: The identification and assessment of risks and the preparation to
minimize the impact of high-risk, unfortunate events.
Semi globalization: A perspective that suggests that barriers to market integration at
borders are high, but not high enough to insulate countries from each other company.
, Chapter 2
Institutional transition: Fundamental and comprehensive changes introduced to the formal
and informal rules of the game that affect firms as players
Example; Russia’s transitions from a communist totalitarian state to a market
economy with regular elections.
Institutions are supported by 3 “pillars” by Richard Scott:
Formal institutions Laws Regulatory pillar
Regulations
Rules
Informal institutions Norms Normative pillar
Culture Cognitive pillar
Ethics
Regulatory pillar: The coercive power of governments specifies the do’s and don’ts.
Normative pillar: The mechanism through which norms influence individual and firm
behavior.
Cognitive pillar: The internalized (or taken-for-granted) values and beliefs that guide
individual and firm behavior.
Transaction cost: The cost associated with economic transactions/costs of doing business
Important source is opportunism: The act of seeking self-interest with guile
(misleading, cheating).
Transaction economies: A subset of emerging economies, particularly those moving from
central planning to market competition.
Political system: Rules of the game on how a country is governed politically
2 primary political systems:
- Democracy: A political system in which citizens elect representatives to govern the
country on their behalf
Individual’s right to freedom of expression and organization
- Totalitarianism: A political system in which one person or party exercises absolute
political control over the population
4 different types;
Communist totalitarianism: communist party. China & North Korea.
Right-wing totalitarianism: is characterized by its intense hatred against
communism. One party restricts political freedom, arguing that such freedom
would lead to communism.
Theocratic totalitarianism: monopolization of political power in the hands of
one religious party or ground. Iran & Saudi Arabia.
Tribal totalitarianism: one tribe or ethnic group monopolizing political power
and oppressing other tribes or ethnic groups
Chapter 1
International business:
1) A business (firm) that engages in international (cross-border) economic activities,
and/or
2) The action of doing business abroad
Multinationals enterprise (MNE): A firm that engages in foreign direct investment
investment in, controlling, and managing value-added activities in other countries.
Emerging economy/markets: “developing country”
Purchasing Power Parity (PPP): A conversion that determines that equivalent amount of
goods and services that different currencies can purchase.
Gross Domestic Product (GDP): Sum of value added by resident firms, households and
governments operating in an economy.
Gross National Product (GNP): GDP plus income from non-resident sources abroad.
Gross National Income (GNI): GDP plus income from non-resident sources abroad. GNI is the
term used by the world bank and other international organizations to supersede the term
GNP.
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.
Globalization: The close integration of countries and peoples of the world.
Risk management: The identification and assessment of risks and the preparation to
minimize the impact of high-risk, unfortunate events.
Semi globalization: A perspective that suggests that barriers to market integration at
borders are high, but not high enough to insulate countries from each other company.
, Chapter 2
Institutional transition: Fundamental and comprehensive changes introduced to the formal
and informal rules of the game that affect firms as players
Example; Russia’s transitions from a communist totalitarian state to a market
economy with regular elections.
Institutions are supported by 3 “pillars” by Richard Scott:
Formal institutions Laws Regulatory pillar
Regulations
Rules
Informal institutions Norms Normative pillar
Culture Cognitive pillar
Ethics
Regulatory pillar: The coercive power of governments specifies the do’s and don’ts.
Normative pillar: The mechanism through which norms influence individual and firm
behavior.
Cognitive pillar: The internalized (or taken-for-granted) values and beliefs that guide
individual and firm behavior.
Transaction cost: The cost associated with economic transactions/costs of doing business
Important source is opportunism: The act of seeking self-interest with guile
(misleading, cheating).
Transaction economies: A subset of emerging economies, particularly those moving from
central planning to market competition.
Political system: Rules of the game on how a country is governed politically
2 primary political systems:
- Democracy: A political system in which citizens elect representatives to govern the
country on their behalf
Individual’s right to freedom of expression and organization
- Totalitarianism: A political system in which one person or party exercises absolute
political control over the population
4 different types;
Communist totalitarianism: communist party. China & North Korea.
Right-wing totalitarianism: is characterized by its intense hatred against
communism. One party restricts political freedom, arguing that such freedom
would lead to communism.
Theocratic totalitarianism: monopolization of political power in the hands of
one religious party or ground. Iran & Saudi Arabia.
Tribal totalitarianism: one tribe or ethnic group monopolizing political power
and oppressing other tribes or ethnic groups
