1. Globalisation MKIB101

Institution-based view

the influence of the external environment, ‘the rules of the game’

Formal institutions

written laws, regulations, and policies enforced by local authorities, codified rules

Informal institutions

implicit culture, norms, and values enforced by social expectations

Resource-based view

focuses on the internal resources and capabilities of a firm, exmaines firm-specific advantages and disadvantages that allow a company to stay ahead of competition

Liability of foreignness

foreign businesses are disadvantaged by being foreign and they lack familiarity with the institutions in the country

MNEs

multinational enterprises that usually engage in FDI

FDI

foreign direct investment - the business invests in assets they directly control and manage in multiple countries

SME

small and medium enterprises - international firms with less than 500 employees, usually participating in international activities like exporting rather than FDI

Globalisation

Key characteristics:

1. “smaller space'‘ - living standards are interconnected by worldwide events

2. “shrinking time” - one event can have implications immediately, anywhere in the world

Historical trends

19th century - acceleated globalisation due to innovations in transport and communication

Post-WW1 - faced restrictions

Post-WW2 - significant decline in barriers under the World Trade Organisation (WTO)

Economists’ lens

examine trade and capital flows

Political scientists’ lens

focus on potential loss of national sovereignty due to the influence of supranational bodies like the world bank and IMF (International Monetary Fund)

Sociologists’ lens

believe it leads to a global culture dominated by multinational companies

Optimists’ perspective

• productivity gains

• greater consumer choice

• sharing “green” technologies

Pessimists’ perspective

• increase in inequality

• job losses in advanced economies

• desruction of natural habitats by shifting pollution to countries with less regulation