1. Influence of Institutions on Firms, Managers and Firm Behavior
Formal Formal and Informal Constraints
Firms
Firm Behavior
Informal Normative & Cognitive Constraints
Managers
© J. McNett, Influenced by W. R. Scott (2008) and M. W. Peng (2002, 2009)
LO1

2. Global Level Institutions
United Nations
Bretton Woods Institutions
International Monetary Fund
World Bank
World Trade Organization

3. Global Level Institutions The United Nations
Promotes peace and global stability
192 member-nations
Has many functions related to business
General Assembly
Deliberative body of the UN
All member-nations, each with one vote
Security Council
Responsible for peace and security
5 permanent members with veto power(U.S., Russia, China, France, UK)
10 elected members
LO3

4. Global Level Institutions Bretton Woods
Meeting in Bretton Woods New Hampshire, U.S. at end of World War II (July 1944)
44 Allied Nations
Established Monetary Institutions
International Monetary Fund (IMF)
World Bank
Established a Monetary System
LO4

5. Global Level Institutions International Monetary Fund
Promotes international monetary cooperation
Coordinates multilateral monetary rules and their enforcement
185 members who contribute funds on quota base
Quota determines the country’s number of votes
IMF lends out these funds to members
LO4

6. Global Level Institutions International Monetary Fund
Facilitates expansion and balanced growth of international trade
Promotes exchange stability and orderly exchange arrangements among members
Establishes a multilateral system of payments
Makes funds available for balance of payments corrections
LO4

7. Global Level Institutions International Monetary Fund Current Issues
Convince rising economies to accept multilateral responsibilities beyond their economies
Prevent protectionism in U.S. and Europe as Asian economies grow
Become action-prone as financial crises become global and more complex
Support the process of regionalization of currencies
Help financial markets spread risk from ecological issues
LO4

8. Global Level Institutions World Bank’s Major Institutions
The World Bank funds development projects
Comprised of two major and three smaller institutions
International Bank for Reconstruction and Development (known as the World Bank)
Funds development loans to middle income, credit-worthy countries
International Development Association
Funds poorer nations’ development
LO4

9. Global Level Institutions The World Trade Organization
The World Trade Organization (WTO) provides and helps implement rules of trade
151 member nations; began in 1995
Negotiates core agreements among member nations
Establishes rules for trade
Helps settle trade disputes
Outgrowth of General Agreement on Tariffs and Trade (GATT)
Induced trade liberalization from 1947 to 1995
LO4

10. Global Level Institutions The World Trade Organization
Uruguay Round
Established the WTO
The last extended conference of GATT negotiations
WTO Principles
Trade without discrimination (MFN principle)
Freer trade, gradually, through negotiation
Predictability, through “binding” and transparency
Fair competition
Encouragement of development and economic reform
LO5

11. Global Level Institutions The World Trade Organization Challenges
WTO talks in Doha, Qatar (2001): members agreed to work on implementing present agreements
Developing nations face unique constraints that limit their ability to benefit from WTO trading system
Aid-for-trade initiative (2008)
Major problem: Agricultural subsidies and tariffs
Trade-related intellectual property rights (TRIPS): protection of copyrights, trademarks, trade secrets, other intellectual property matters
LO5

12. Regional Institutions Cooperative Military and Security Agreements

13. Regional Institutions Organization For Economic Cooperation and Development
Organization for Economic Cooperation and Development (OECD)
Group of developed countries dedicated to promoting economic expansion in its member-nations
Provides information on economic and other activities within its member nations
Provides setting for discussion of shared economic policy issues
LO6

14. Regional Institutions Other Economic Institutions
Organization of Petroleum Exporting Countries (OPEC)
Cartel of 12 petroleum exporting countries
The Group of Eight (G8)
Group of government leaders from major industrialized nations that meets regularly to discuss issues of concern
LO7

15. The G8 Members (www.undp.org)
LO7

16. Regional Economic Institutions
NAFTA
Established January 1, 1994
Agreement creating a free trade area among Canada, Mexico, and the United States
EFTA
A free trade area between Norway, Iceland, Liechtenstein, Switzerland
LO8

17. Regional Institutions The European Union

18. Regional Institutions The European Union
European Commission
Runs day-to-day operations
European Court of Justice (ECJ)
Rules on policy issues
European Monetary Union
Established use of euro in the 15-country euro zone
Three “old EU” countries do not participate: Denmark, Sweden, and the United Kingdom
The single currency reduces the cost of doing business across EMU country borders
LO8