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Broadening

The extension of economic and geographic linkages to encompass virtually all major societies and states

Localization

The narrowing and contraction of the interactions and interdependencies among peoples and countries of the world

Deepening

An increase in the frequency and intensity of state and societal interactions

Cultural differences

Different languages, ethnicities, religions, values, norms

Administrative differences

Differences in corruption, legal rules, political risk and instability, government policies, and colonial ties

Geographical differences

Physical remoteness, lack of a common border, lack of sea or river access, size of country, weak transportation or communication links, climates

Economic differences

Differences in consumer incomes, costs, and human and natural resources

Glocalization

The idea that both forces of globalization and localization are taking place at the same time

Normative

Related to peer pressure or social expectations. Example: “You should maintain eye contact when greeting your superior.”

Cognitive

Related to deep to deep-seated assumptions and often hard to explain

Regulative

(Formal)

Normative

(Informal)

Cognitive

(Informal)

Corruption and bribery

‘Facilitating payments’ are not uncommon

civil law

Based on Roman Law and Napoleonic Code

common law

Based on precedents and traditions, judgment based on interpretation of law

Theoretic law

Based on religious teachings

Voice and Exit

Firms have two basic strategies to exert pressure on politicians

Voice

Typically means lobbying, but can also be collective bargaining

Exit

Means relocating value -adding activities offshore (or at least the threat)

MNE

Multinational Enterprise: a firm that uses foreign direct investment (FDI) to establish or purchase income-generating assets abroad

Localization

-Nationalism
-Cultural diversity and values
-History and tradition
-Security concerns

Liability of foreignness

the disadvantage that comes from not knowing the rules of a country
-higher transaction costs and greater risk of experiencing opportunistic behavior

Firm's strategies of overcoming tension between globalization and localization

1. global integration of value chain

2. adaptation of product/marketing

3. organizational centralizaiton/decentralizaiton

4. market entry decision

5. integrated non-market strategy

cognitive institutions

informal

normative institutions

informal

Power distance

Weaker members’ acceptance of inequality

Individualism

Loose ties between individuals, each responsible for themselves

Masculinity

The degree to which men have different values than women

Uncertainty avoidance

A function of how comfortable group members feel with uncertainty

Ethnocentric behavior

Belief in the superiority of one’s own culture

Individualism is greater when

Sufficient time for your personal or family life is important

Individualism is lower when

Variety and adventure in the job is important

Masculinity is greater when

There is a distribution of roles between the sexes

Masculinity is lower when

There is a sense of modesty and caring for others

long term orientation

thrift and perseverance

Long-term orientation is greater when

you attach more importance to thrift / being economical

Short -term orientation is when:

you attach respect for tradition

globalization

trend away from distinct national economic units and toward one huge global market

Globalization of production

trend by individual firms to disperse parts of their productive processes to different locations around the globe to take advatange of difference in cost and quality factors of production

globalization of markets

moving away from an economic system in which national markets are distinct entities isolated by trade barriers and barriers of distance, time, and culture, and toward a system, in which national markets are merging into one market

international business

BUSINESS (OR AN INDIVIDUAL FIRM) THAT ENGAGES IN
INTERNATIONAL (CROSS-BORDER) ECONOMIC ACTIVITIES

FDI

FOREIGN DIRECT INVESTMENT