Week 2 - International Business Strategy Exam Questions with Latest Update

Explain the theory of: New institutional economics & its impact on IBS - ANSWER-It considers institutions as rules of the game under which firms need to operate. These institutions create an environment in which a firm operates. This means institutions create order and minimize uncertainty, mostly in economic transactions. In an international business context, operating in multiple countries also means that MNEs face multiple institutional environments, which are not always the same and might be hard to navigate. Explain the theory of: Institutional analysis & its impact on IBS - ANSWER-It is based on the argument that communities govern themselves by using a common pool of resources. For example, consider a tribe in Africa with common resources, such as a water well. They use this resource collectively (pool it collectively) and distribute it to everyone (even people who might not have contributed to the community in any way). Usually, every community member has a role and contributes to the community somehow. In an IB context, this could mean that an MNE needs to consider not just the country-level institutional environment but the community-level environments (and communities can be any community, i.e., religious. Explain the: Institutional-based view & its impact on IBS - ANSWER-This theory also considers how the environment of a country impacts firm strategy. However, it is more dynamic and considers the interaction between institutional environments and organizations. It focuses on how firms change their strategies quickly and entrepreneurially based on challenging environments, for example, created by emerging markets/developing countries. It is not uncommon in emerging markets for sudden unanticipated environmental challenges to arise, such as infrastructural challenges related to electricity outages, road conditions, etc. This means that MNEs change their strategies based on the environmental challenges they face in countries. Explain the: Comparative capitalism theory & its impact on IBS - ANSWER-this theory considers the institutional environment as socio-economic arrangements within a country, i.e., the interactions of a country's educational system, labour market, financial system, legal system, etc. The interactions of these market drivers create the unique business environment of a country, i.e., its form of capitalism. This institutional theory strand focuses more on the overall market structures and how, for example, the education system is connected to the labour market and how the labour market is connected to the legal system (contract law etc..). It allows countries to be mapped