International Business 2.0

International business

Firms engaging in cross-border economic activities, including trade and investment.

Global business

Business activities conducted worldwide, including both domestic and international operations.

GDP vs GNP

GDP measures production within a country; GNP adds net income from overseas investments.

GNI

GDP plus income from non-resident sources abroad.

Purchasing power parity (PPP)

An adjustment to GDP reflecting differences in cost of living.

Emerging economies

Economies transitioning toward higher income and industrialization (e.g. BRIC countries).

Liability of foreignness

Disadvantages foreign firms face due to unfamiliarity with the host environment.

Globalization (Guillén, 2001)

Greater interdependence and mutual awareness among global actors.

Semi-globalization (Ghemawat)

Globalization is significant but limited and uneven.

Transnationality Index (TNI)

A measure of a firm’s foreign assets, sales, and employment.

Factors discouraging globalization

National security concerns, trade wars, protectionism, and geopolitical conflict.

Cultural intelligence (CQ)

The ability to understand and adapt to other cultures.

Stages of CQ development

Awareness, identification of differences, adaptation.

Informal institutions (elements)

Culture, religion, and language.

Culture (Hofstede)

Collective programming of the mind distinguishing groups.

Power distance

Acceptance of unequal power distribution.

Individualism vs collectivism

Whether identity is individual-based or group-based.

Uncertainty avoidance

Tolerance for ambiguity and uncertainty.

Long-term vs short-term orientation

Focus on future rewards versus immediate outcomes.

Cultural tightness–looseness (Gelfand)

Strength and enforcement of social norms.

Low-context communication

Direct and explicit communication.

High-context communication

Communication relying heavily on context and implicit meaning.

Stereotypes

Simplified and often inaccurate generalizations about groups.

Religion in international business

Shapes norms and can trigger strong emotional reactions.

Institutions

Formal and informal rules that structure human interaction.

Institutional framework

System of formal and informal institutions governing behavior.

Transaction costs

Costs associated with carrying out economic transactions.

Opportunism

Self-interested behavior pursued with guile.

Formal institutions

Laws, regulations, and rules enforced by governments.

Informal institutions

Norms, values, beliefs, and ethics not formally codified.

Institutional transition

Fundamental and comprehensive changes in institutions.

Institution-based view

Firm success and failure are enabled and constrained by institutions.

Regulatory pillar

Government coercive power through laws and regulations.

Normative pillar

Social norms and values influencing behavior.

Cognitive pillar

Taken-for-granted beliefs and values guiding behavior.

Political system

Rules governing how a country is politically governed.

Political risk

Risk that political changes negatively affect firms.

Democracy

Political system with elected representatives.

Totalitarianism

Political system with absolute control by one person or party.

Economic system

Rules governing how a country is economically organized.

Market economy

Economy governed by market forces with limited government intervention.

Command economy

Economy where government controls production and pricing.

Mixed economy

Combination of market and command economy elements.

Legal system

Rules governing how laws are enacted and enforced.

Civil law

Legal system based on comprehensive statutes and codes.

Common law

Legal system shaped by judicial precedents.

Property rights

Legal rights to use and derive income from resources.

Intellectual property

Intangible property from intellectual activity.

Patents

Exclusive legal rights to new technological ideas.

Copyrights

Legal protection of creative works.

Trademarks

Legal protection of names, brands, and symbols.

Trade secrets

Valuable confidential business information.

Right of publicity

Protection against unauthorized commercial use of identity.

Corporate governance

System defining how firms are directed and controlled.

Cultural clusters

Groups of countries sharing similar cultural traits.

Nationalization

Government seizure of private or foreign assets.

Resource-based view

Firm performance explained by internal resources.

Primary resources

Tangible, intangible, and human resources.

Tangible assets

Observable and quantifiable assets.

Financial assets

Internal funds and external capital.

Physical assets

Plants, offices, equipment, infrastructure, inventories.

Intangible assets

Non-physical but strategically important assets.

Technological resources

Patents, trademarks, and copyrights.

Reputational resources

Brand value, goodwill, relationships.

Goodwill

Value from a firm’s reputation.

Human capital

Skills and knowledge of employees.

Capabilities

Firm-specific abilities to deploy resources.

Value chain

Activities adding value from inputs to outputs.

Benchmarking

Assessing whether a firm can outperform competitors.

Commoditization

Loss of product differentiation and margins.

Outsourcing

Transferring activities to external suppliers.

Offshoring

Relocating activities to another country.

VRIO framework

Tool assessing value, rarity, imitability, and organization.

Innovation capabilities

Ability to develop new products or processes.

Operational capabilities

Ability to efficiently manage operations.

Marketing capabilities

Ability to build brands and stimulate demand.

Distribution capabilities

Ability to deliver products efficiently.

Foreign direct investment (FDI)

Investment to control value-added activities abroad.

Foreign portfolio investment (FPI)

Investment in foreign securities without control.

Multinational enterprise (MNE)

Firm undertaking foreign direct investment.

Horizontal FDI

Investment at same value-chain stage abroad.

Vertical FDI

Investment in different value-chain stages.

Upstream vertical FDI

Investment in earlier production stages.

Downstream vertical FDI

Investment closer to customers.

OLI paradigm

Explains when firms choose FDI over contracts.

Ownership advantage

Transferable firm-specific strengths.

Location advantage

Benefits of producing abroad.

Internalization advantage

Benefits of internal control.

Liability of outsidership

Disadvantages from lack of local networks.

Asset specificity

Investments specific to a transaction.

Market failure

Contracts fail due to high transaction costs.

Tacit knowledge

Knowledge difficult to codify or transfer.

Licensing

Allowing foreign use of assets for royalties.

Franchising

Transfer of a complete business model.

World Trade Organization (WTO)

Organization regulating global trade rules.

GATT

WTO predecessor regulating tariffs and trade.

Most-favored-nation principle

Equal treatment of all trading partners.

Trade dispute settlement

WTO mechanism resolving disputes.

Punitive duties

Retaliatory tariffs after dispute rulings.

Non-discrimination principle

WTO rule prohibiting preferential treatment.