MGM5966 Lecture 2 Recap

The resource-based view analyzes how formal and informal institutions affect firms and other economic actors

• True

• False

Which of the following are pillars of the institutional framework as described by sociologist Richard Scott?

• Normative

• Cognitive

• Regulatory

• All of the above

Which of the following represents a form of property right?

• Ownership of a house

• Copyright

• Trademark

• All of the above

Common law is derived from Roman law, and is influenced by the legal code introduced in France post-French Revolution.

• True

• False

Political risk is associated with the possibility of which type of event?

• The nationalization of a company’s assets abroad

• Civil unrest

• Elimination of tariff subsequent to a company investing in local production

• All of the above

What is not a characteristic of a market economy?

• Buyers and sellers meeting in a market

• Prices react to changes in supply and demand

• Businesses planning production to supply the market in the future

• Business producing according to an economy-wide central plan

In which of the following ways do formal institutions regulate trade?

• By inducing uncodified ethical beliefs into society

• By putting faith in individuals to expose perceived wrong doings

• By allowing the cultural beliefs of a society to dictate the terms of trade

• By imposing laws that make certain trades unacceptable

The key role of institutions is to do what in business transactions?

• Reduce uncertainty

• Increase normative limits

• Increase opportunism

• Reduce resource costs

Which of the following is a proposition of the institution-based view?

• Decisions based on bounded rationality should be avoided.

• Dependency on informal constraints will always increase the political risks associated with a firm.

• When formal constraints are unclear, informal constraints will play a larger role in reducing uncertainty and providing constancy to managers and firms.

• Informal constraints always increases transaction costs for the firm.

Formal institutions include laws, regulations, and rules. Their primary supportive pillar, the __________ pillar, is the coercive power of governments.​