Exam Question
Lecture 1 -
Why does Robinson Crusoe not need institutions to organize daily life?
- Institutions exist only when human cooperation and coordination are required.
- Crusoe is Alone -> No interaction means no exchange, means no contracts
- No information asymmetry, no uncertainty about others intensions
- No transaction cost
(Search, contracting, enforcement)
- Institutions are collective devie
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| Term | Definition |
|---|---|
| Exam Question Lecture 1 - Why does Robinson Crusoe not need institutions to organize daily life? | - Institutions exist only when human cooperation and coordination are required. - Crusoe is Alone -> No interaction means no exchange, means no contracts - No information asymmetry, no uncertainty about others intensions - No transaction cost (Search, contracting, enforcement) - Institutions are collective devie |
| Exam Question Lecture 1 - Explain the association between information asymmetries, transaction costs, and institutions. | - Information asymmetries arise when parties in an exchange have unequal or incomplete information about each others intentions. - Information asymmetries increase uncertainty in human cooperation & coordination - Uncertainty leads to higher transaction costs (search, contract, enforcement) - Institutions regulate and control transactions - Formal & informal rules/norms make transactions more predictable hence hedge the information asymmetries |
| Exam Question Lecture 1 - If someone says: I read the laws, I know how things are going to be handled in country X. Are you convinced the person knows what he/she is talking about? | - No - Informal institutions plays a big role! - Informal norms (embeddedness level in our presented framework) lays the ground for formal institutions. - EX IKEA SAUDI - no formal rules, but informal about women in magazines. |
| Exam Question Lecture 1 - Why are informal norms more stable than formal institutions and require more time to change? | - Informal norms - Emdeddedness layer - these norms evolve over long term social learning - Self-enforcing, social pressure - Transmitted across generations - Cannot be changed overnight |
| Exam Question Lecture 1 - Can you think of moments of instability; moments when formal institutions change out of a sudden? - what are potential drivers? | - External shocks can change formal institutions rapidly - Economic shocks, catastrophic events. - 9/11 for example, flight rules |
| Exam Question Lecture 1 - What is the assumed relationship between embeddedness, institutional environment, governance and markets? | - Embeddednes (informal institutions) topy layerd. Changes slowly and shaoes all other layers function - Institutional environment (formal rules of the game) Legal and regulatory framework - Governance (play of the game) Contracts, corporate governance, JVs. How actors interact within the constraints - Markets/Resource allocation - The outcome layer, how resources are exchanged and distributed Relationship -> each level constraints the one below, but lower levels can feed back and influence higher levels. A change at one level triggers disequilibrium across others. |
| Exam Question Lecture 2 - Provide a simple definition of culture | - Shared practices, values, beliefs and behaviours learned throught social learning - Collective knowledge and experience |
| Exam Question Lecture 2 - What is the relation between culture and institutions? At which instituional level operates culture? | - Culture provides values, norms and shared understandings and give rise to informal institutions. - Operates in the embeddedness level in Williamssons institutional hierarchy. |
| Exam Question Lecture 2 - Is cultural distance simply a disadvantage? Or can cultural distance be turned into a source of advantage? | - Traditionally cultural distance has been viewed as a liability. - Can be a advantage source if it fosters organizational learning, creativity and innovation. - MNEs can learn from different cultures. Distance can become an asset. |
| Exam Question Lecture 2 - How would you describe Hostede’s index of cultural distance? Which methodological problems come to mind? | - Widely used framework to measure national cultural distance - 116 IBM employees, 40 countries - Four main dimensions Power distance, Uncetainty avoidance, Individualism vs collectivism, Masculinity vs femininity - Single company bias - Time bound data from the 70s - Looong questionaire - Cultural bias |
| Exam Question Lecture 2 - Offer a theroetical explanation for why culture does not only operate at the national level, but is also evident at the local level. | - There is national culture, however sub-national or local variation in historical experience, insitutions and social learning is more present. As the culture is acquired from social learning mostly happening in local communities. Culture is multilayered |
| Exam Question Lecture 3 - Discuss early theories in international business that have been symathetic to an explicit inclusion of instituional arguments. | - Early international business focused on industry structure and firm-specific advantages - Ex OLI framework, why firms engage in FDI. Three advantages Ownership, Location, Internationalization - Liability of foreigness concept, foreign firms face extra costs due ti institutional and cultural differences. - Both frameworks anticipated a institituonal turn. |
| Exam Question Lecture 3 - In a nutshell, from the perspective of institutions based research, which is the optimization problem corporations face holding constant competition and firm specific resources? | - How firms can best align strategy with the formal and informal institutions of its environment - Replicate, adapt, innovate - Minimize transaction costs. - The optimization problem is strategic alignment with instititutional environment and embeddedness finding the best way to operate within the rules of the game. |
| Exam Question Lecture 3 - Offer practical arguments, why institution based strategies become ever more important in the global economy. | - Global shift FDI to developing economies instead of developed. - Rising institutional diversity - Political and regulatory volatility |
| Exam Question Lecture 3 - Reflect on the practicalities of measuring institutional differences. Which problems exist? | - Institutions are partly informal and hard to observe - Reliance on experts or surver based assessments - Cross-country comparability issues - Lack of coverage for informal and local variation |
| Exam Question Lecture 3 - | - What is different in the host country environment? - How does it matter? - How do we respond? - How do we profit? |
| Exam Question Lecture 3 - The Toyota video describes a local adaptation story: What elements were central in making Toyota a successful japanese car maker and how are these direct responses to the company’s institutional environment? | Japan is a Coordinated Market Economy (CME), which relies on network-based coordination. Toyota’s success is a prime example of strategic "adaptation", directly responding to this institutional environment by leveraging its non-market, network-based characteristics. |
| Exam Question Lecture 4 - Broadly speaking, under which crcumstances are strategic alliances a preferred foreign market entry mode? Specify how costs and benefits vary with the institutional environment. | Strategic alliances are preferred when - Institutional environment is weak - Formal institutions are underdeveloped - Local resources, legitimacy and tacit market knowledge are necessary for succesful operation - And when they are the only legal entry option Benefits: - Local knowledge, distribution channels, networks - Shared risks and costs - Enhanced legitimacy Costs: - Dependence - Reduced strategic flexibility - Higher transaction costs and risk for technology leakage |
| Exam Question Lecture 4 - Broadly speaking, under which circumstances are greenfield investments a preferred foreign market entry mode? Specify how costs and benefits vary with the institutional environment. | When - MNE wants full ownership and control - Host country institutional environment is strong and transparent - Protection of technology and processes is available Benefits: - Full control - Best protection of tech - Ability to replicate global standards |
| Exam Question Lecture 4 - M&As seem to combine the best of both strategies. Which risks need to be considered? | M&As combine advantages as alliances with control but there are risks - Integration risk - Information asymmetries - Cultural governance frictions - High sunk and irreversible cost |
| Exam Question Lecture 4 - Yahoo has tested various ways to access the Chinese market. Which factor was crucial for Yahoo to partner with Alibaba (Jack Ma)? | - Jack Ma was a individual that understood the western way of doing business - Institutional constraints are present in China - Jack Ma had government connections, but acts like a western executive |
| Exam Question Lecture 4 - If you were to generalize from the Yahoo investment in Alibaba, how would you describe the role of informal institutions in market entry strategies? | Informal institutions such as trust, culture, relations and local legitimacy can be decisive when formal institutions are weak or state controlled like in China. |
| Exam Question Lecture 5 - Discuss how financial systems differ across broad legal traditions. | Common Law: Market-oriented; strong shareholder & creditor protection; dispersed ownership; stock market finance. German Civil Law: Bank-oriented; medium protection; concentrated ownership; stakeholder coordination. Scandinavian Civil Law: Medium–high protection; coordinated markets; family/state networks. French Civil Law: Bureaucratic, state-led; weakest investor protection; concentrated family/state ownership. |
| Exam Question Lecture 5 Explain why stock markets tend to be more advanced in Common Law countries than in Civil Law countries. | Strong legal protection for investors → higher trust & participation. Efficient contract enforcement & low transaction costs. Dispersed ownership and transparent governance enable deep, liquid capital markets. Civil Law = weak protection, bureaucracy → concentrated ownership, limited public markets. |
| Exam Question Lecture 5 - Family firms are dominant in many emerging countries: Discuss specific risks associated with family firms | Family firms dominate where formal institutions are weak. Risks with family firms - Insider control, nepotism - Lack of professional management - Minority shareholder exploitation - Succession disputes within the family - Limited external finance due to low transparency |
| Exam Question Lecture 5 - Reflect on the intrinsic frictions involved in cross-national cooperations embedded in different legal and governance systems | - Goal conflicts - anglo-american firms focus on shareholder value while european and asian focuses on stakeholder value! - Control and accountability - Marked based systems rely on exits (that investors sell shares if they are unhappy, while network based systems rely on voice - negotiation through banks etc |
| Exam Question Lecture 5 - Do you think cross-national institutional convergence facilitates strategic alliances involving different systems of governance and different systems of ownership? | Institutional convergence -> That institutions become more alike all around the world. Partly yes - Harmonize legal and financial systems - Easier cooperations - Reduces uncertainty and transaction costs But - Convergence is mostly formal institutions - Informal institutions remain different |
| Exam Question Lecture 6 - Name an example how the instituional embeddedness level can influence the operation of supply chains. | Example GM in China - GM forced to buy from local dealers, that could not hold the standard - They cooped by wholly owned warehousing and trading company |
| Exam Question Lecture 6 - Supply chains of MNEs are not necessarily global. Discuss in which industries supply chains tend to be local and reflect on the question which institutions (at the environment level) are most likely to influence local supply chains. | Supply chains are local when you can rely on country specific resources with a good quality and a good price. Supply chains tend to be local when dealing with goods with a lower lifespan, or when quality or specialty is very country specific - Ex McDonalds in russia could not find good potato growers, in the country eating potatoes in everything! |
| Exam Question Lecture 6 - Vertical integration can be a response strategy to weak market institutions. Using one example discuss how vertical integration reduces institutional risks | Vertical integration - company controls multiple chains in the supply chain. - Ex Mcdonalds in russia! Suppliers ignored contracts and quality standards. - McDonalds invested in their own plantings, quality labs and distribution central fully internal. Its a way of internalizing quality control and enforcement |
| Exam Question Lecture 6 - Going back to the example of McDonald’s in Russia, how would you explain the different supply- strategies designed for their core-ingredients: Lettuce – potato – poultry. What general lessons would you draw regarding the relation between input and localization strategy? | The larger the institutional voids are, the greater are the requirements for quality control and enforcement from the home country company. - Localisation is gradual and depends on each input and institutions, formal and informal! So localization depends a lot on institutional readiness Institutional voids are input specific! |
| Exam Question Lecture 6 - To what extent is McDonald’s market entry in India a variation of the Russia strategy. What is new? | - Similar institutional climate in terms of weak institutions and large institutional voids - Partnering up with local partners, but focusing a lot on vertical integration. - Cultural institutions played a bigger role in india (no beef) - So the same problem, in different ways- Russia with vertical integration and India with local adaptation and cultural innovation. |
| Exam Question Lecture 7 - Discuss in which way institutional differences (or voids) in host country financial systems can influence sales strategies. | - Trustworthy payment - Cash or card - Credit access - Internet access When financial institutions are weak - Adapt and innovate their sales strategy to match local conditions. Cash on delivery for example as Amazon offered in India. - One can also focus on other parts until the host country "matures" in that matter |
| Exam Question Lecture 7 - How does the inferior quality of standardization affect strategies for international sales? What type of managerial conflicts do you foresee between headquarter and subsidiary? | Inferior = Weak - MNEs cannot rely on market mechanisms to guratantee product quality and not customer trust either - Firms must adapt and conflicts can be things as; Non-alignment with HQ, costs and legitimacy, performance metrices are weak in the beginning! |
| Exam Question Lecture 7 - In your own words, how would you describe the sales strategy GM drafted for the Chinese market? Which role did the local JV-partner play in designing GM’s initial sales startegy? | - GM focused on corporate, government and institutional buyers by listnening to the JW SAIC when they told GM to enter with Buick because local individuals associated that with luxury because some high person in china drove one. |
| Exam Question Lecture 7 - Which elements of its proven sales-strategy did Amazon have to drop for its engagement in India? | - They had to drop its own inventory of own products because of FDI product regulation - Cash on delivery - Chai chart and digital infrastructure - Logistics - One can argue that these also are dropped, however its in Amazons scope to bring them back! |
| Exam Question Lecture 7 - Which general lessons would you draw from Amazon’s market entry in India? If you were to distil three key features / attributes of Amazon’s strategy, which would you pick? | - Substitute missing institutions to the problems in payments, logistics and FDI limits - Redesign of sales - Fetching local owners with the Chaichart, Tatkal - Local infrastructure, and cash on delivery |
| Exam Question Lecture 8 - Identify relevant factors in the MNEs home environment and in the host environment that jointly shape the similarity/dissimilarity between the parent’s and subsidiary’s HRM system. | Home country - Home-country labor market regulation - Corporate governance model - Cultural values - Institutional experience and strategic intent Host country - Formal labor market institutions - Culture - De facto enforcement, how things actually are enforced - Economic development and skill base |
| Exam Question Lecture 8 - Identify one factor (of your choice) at the instituional embeddedness level and explain, how this factor could influence the choice of work systems | - Cultural norms of hierarchy and leadership - Do people enjoy working in groups? - Is it a flat organization or is it strctly hierarchical - team autonymity |
| Exam Question Lecture 8 - Identify one factor (of your choice) at the instituional environment level, and explain, how this factor would influence the specification of talent development. | - Labor protection laws In countries where it is strong: Example in scandinavia, germany, france - Workers expect development and continues skill upgrading. - long term Countries where its weak Example USA, India - Hiring and firing is easy hence short term, firm specific, task based training |
| Exam Question Lecture 8 - Freedom of Labor markets (de jure) and the enforcement of labor rights are two distinct factors. Discuss, why a lateral move of an MNE between two similarly free labor markets, can still involve a high corporate risk, if the move involves weaker legal enforcement | - De jure, describes what the law allows on paper - Enforcement is a different part, how well these rules are followed and how it works in practice. - Lateral movement can still be risky. Weak enforcement can have hidden liablities, for example Walmart in germany! - Being free is not the same as being protected, moving between free labor markets can step into weak enforcement environments. Risks of reputation for the firm. Legal compliance risk etc |
| Exam Question Lecture 8 - What led to the failure of Walmart in Germany? Could Walmart have been successful? How? | Walmart choose to not study the cultural landscape or the formal institutions in germany - Broke laws, no relationships - American greetings made shoppers and employees uncomfortable - Anti union stance - Low price focus, regulated in Germany and not allowed there. |
| Exam Question Lecture 8 - Looking back at the KazOil case: how do you assess the role of national culture in the design of effective HRM for subsidiaries. Does national culture always pose a critical constraint? | National culture shapes informal determined how employees understood authority, trust and reward making unadapted western HRM practises ineffective. National culture does not alway constrain HRM transfer, but if ignored it becomes a critical barrier, otherways it can become a strategic resource |