National Differences in Political Economy – Week 2 Lecture

Vocabulary flashcards covering key terms from Week 2: National Differences in Political Economy, Political, Legal, and Economic Systems, and their implications for international business.

Political Economy

The combined political, economic, and legal systems of a nation that shape the business environment.

Political System

The rules of the game that determine how a country is governed politically.

Collectivism

A philosophy that prioritises group goals over individual goals.

Individualism

A philosophy emphasising individual freedom and self-expression.

Socialism

Belief that state ownership of the means of production best serves society’s interests.

Communists

Socialists who seek to achieve socialism through violent revolution and totalitarian dictatorship.

Social Democrats

Socialists who pursue socialism by democratic means.

Totalitarianism

A political system in which one person or party exercises absolute control and denies basic civil liberties.

Democracy

Government by the people, exercised directly or through elected representatives.

Representative Democracy

Form of democracy with elected officials, free media, universal suffrage, and constitutional safeguards.

Communist Totalitarianism

Totalitarian rule that justifies dictatorship as necessary to achieve socialism.

Theocratic Totalitarianism

Totalitarian rule in which political power is based on religious principles.

Tribal Totalitarianism

Totalitarian rule by a party or individual representing a specific ethnic tribe.

Right-Wing Totalitarianism

Regime allowing economic freedom but restricting political freedom to prevent communism.

Political Risk

Risk that political changes will adversely affect domestic or foreign firms.

Macro Political Risk

Political events (e.g., revolution) that impact all firms in a country.

Micro Political Risk

Political actions that target specific industries, firms, or projects.

Geopolitics

International political relations and associated risks such as war or terrorism.

Legal System

A country’s rules that regulate behaviour and resolve disputes.

Common Law

Legal tradition built on judge-made precedents, customs, and history.

Civil Law

Legal tradition based on comprehensive written codes; case law is secondary.

Theocratic Law

Legal system founded on religious teachings (e.g., Islamic law).

Contract Law

Body of law governing the enforcement of agreements.

Legal Risk

Likelihood that a partner will breach a contract or expropriate property rights.

Property Rights

Legal rights to use and derive income from an economic resource.

Private Action

Violation of property rights by individuals or groups (e.g., theft, piracy).

Public Action

Violation of property rights by public officials through extortion or expropriation.

Corruption

Abuse of public office for private gain.

Foreign Corrupt Practices Act (FCPA)

U.S. law prohibiting bribery of foreign officials in international business.

Intellectual Property (IP)

Creations of the mind such as software, music, or chemical formulas.

Intellectual Property Right (IPR)

Legal right associated with ownership of intellectual property.

Patent

Exclusive rights granted to an inventor for a specified period.

Copyright

Exclusive rights of authors and artists to publish and distribute their works.

Trademark

Registered design or name that distinguishes a product.

Piracy

Unauthorised use of intellectual property.

Economic System

Rules governing how a country organises economic activities.

Command Economy

System where government owns factors of production and sets prices.

Market Economy

System where private owners make production decisions based on supply and demand.

Mixed Economy

System combining private and state ownership; government controls strategic sectors.

Economic Risk

Likelihood that economic mismanagement will harm a firm’s goals.

Managerial Implications

Actions MNEs must take to adapt to a country’s political, legal, and economic systems.