Deck 4: Emphasizing Institutions, Cultures, and Ethics

Question 1

Relational contracting is not advantageous when the size of the economy is limited.

Answer 1

False

Question 2

The global competitive accomplishments of a company such as Levi-Strauss are due in part to its domestic demand.

Answer 2

True

Question 3

Cognitive pillar refers to the internalized, taken-for-granted values and beliefs that guide individual and firm behavior.

Answer 3

True

Question 4

Historically, the strategy literature has focused on the specific relationship between strategic choices and institutional frameworks.

Question 5

One disadvantage of relational contracting is that it may cause firms to abandon established relationships.

Question 6

In Porter's diamond model, the four factors that determine the competitive advantage of different industries in different nations include the history and institutions that influence firm rivalries.

Question 7

Company A purchases its supplies directly from a foreign company. Because of the distance between the two companies, this transaction is considered an arm's-length transaction.

Question 8

Relying on informal connections is a strategy only relevant to firms in emerging economies.

Question 9

The more members a relationship-based exchange network has, the better the network works.

Question 10

Opportunism fosters transaction costs.

Question 11

Strategic choices are selected within and constrained by institutional frameworks in developed economies.

Question 12

Formal, market-supporting institutions lower transaction costs and facilitate new entries.

Question 13

With his diamond model, Porter describes the factors that determine the competitive advantage of globally leading industries.
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Question 14

Uncertainty involved in transactions of any kind contributes to greater transaction costs.

Question 15

Economic crises have always been considered to be a force majeure.

Question 16

The key role of institutions is increasing uncertainty for international firms.

Question 17

Western firms tend to focus on relatively short-term profits and shorter planning horizons.

Question 18

In Porter's diamond model, factor endowments include such components as firm strategy and interfirm rivalry.

Question 19

Strategic choices are direct outcomes of the reduced interaction between institutions and firms.

Question 20

Striking differences between institutions in developed and emerging economies has eliminated the institution-based view from strategy discussions.

Question 21

All sides agree that ethics can make or break a firm.

Question 22

Catastrophes may allow ethical firms to shine.

Question 23

Companies that follow ethical imperialism understand that what is ethical in one country should be the standard for all countries.

Question 24

Firm E faces an ethical challenge and responds by accepting responsibility and doing all that is required to make the necessary changes in operations. This response is called a defensive response.

Question 25

Hofstede's studies were based on surveys from 1968-1972 and in light of the cultural changes that have occurred throughout the world in the past forty years, his dimensions of culture are no longer applicable in assessing the role of culture in global business.

Question 26

In Hofstede's dimensions of culture, almost all cultures tend toward a long-term orientation and emphasize perseverance.

Question 27

Australia, considered an individualistic society, fosters a higher level of entrepreneurship than generally found in collectivistic societies.

Question 28

Doing business with foreigners may significantly reduce transaction costs over doing business with domestic firms.

Question 29

Richer, developed countries tend to be less corrupt than poorer, developing countries.

Question 30

The best managers, who expect norms to shift over time, constantly decipher the changes in the informal "rules of the game" and then incorporate them in setting the strategies of the firm.

Question 31

When speaking of a culture, it is important to acknowledge that cultures include many regional, ethnic, and religious layers.

Question 32

Firms from collectivist cultures are the most collaborative with out-groups.

Question 33

Ethics are universal. What is unethical in one country will be viewed as unethical in other countries.

Question 34

A firm's code of conduct, although typically written, can also be unwritten.

Question 35

A middle-of-the-road approach to ethics regards respect for human dignity and basic rights as an absolute minimum ethical threshold for all operations around the world.

Question 36

The institutional distance between two firms, based on their country of origin, is the same thing as cultural distance.

Question 37

Company Y, which is self-motivated to "do it right" in its business practices regardless of social pressures, follows an instrumental view of ethics.

Question 38

In facing ethical challenges, a defensive firm anticipates institutional changes and does more than is required to before ethically.

Question 39

Hofstede proposed five dimensions of culture, which include power distance and uncertainty avoidance.

Question 40

Transaction cost theorists argue that institutions emerge to combat opportunism.

Question 41

Which of the following is an example of a formal institution?​

A)​Rules.
B)​Culture.
C) ​Ethics.
D) ​None of the above.

Question 42

An institution-based view of strategy considers which of the following factors?

A)Industry-level conditions.
B)Firm-specific conditions..
C) Society's culture and ethics.
D) All of the above.

Question 43

Which of the following is NOT one of Porter's five dimensions of culture?

A)​Power distance.
B)​Individualism.
C) ​Long-term learning.
D) ​Uncertainty avoidance.

Question 44

Over time, when the scale and scope of informal transactions ________, the cost per transaction move down and benefits move up.

A)​Expand
B)​Contract
C) ​Are eliminated
D) ​Increase through opportunism

Question 45

Reasons for increased FDI in China in recent years do not include:

A)Low cost labor.
B)A sizeable domestic market.
C) Strong intellectual property protections.
D) Increased emphasis on binding international commercial arbitration by Chinese authorities.

Question 46

In high femininity societies (such as Sweden):

A)​Men frequently assume the roles of teachers, nurses, and househusbands.
B)​Women have occupations that fall primarily in the caring professions.
C) ​Men experience a strong form of societal-level sex role differentiation.
D) ​Women seldom take on the roles of politicians and scientists.

Question 47

Which of the following does NOT define institutions?

A)"Institutionally devised constraints that structure human interaction."
B)"Regulatory, normative and cognitive structures and activities that provide stability and meaning to social behavior."
C) Government of individual and firm behavior.
D) The "rules of the game."

Question 48

Power distance is best defined as:

A)The degree of social inequality.
B)The identity of an individual is not based on the identity of his or her collective group.
C) Sex role differentiation.
D) The extent to which people accept ambiguous situations.
E) Emphasis on perseverance and savings.

Question 49

Institutions do which of the following?

A)Reduce uncertainty.
B)Signal which conduct is acceptable and which is not.
C) Reduce opportunism and transaction costs.
D) All of the above.

Question 50

Porter's "diamond" model:

A)Explains competitive advantage of leading industries within the same country.
B)Explains competitive disadvantage of globally leading industries in different countries.
C) Has been criticized for ignoring history.
D) Has been criticized for focusing on institutions.

Question 51

Strategists who are sensitive to cultural differences in making strategic decisions will find that:

A)​A long-term orientation is always more helpful when it comes to strategy.
B)​The identity of an individual is based on the identity of his or her collective group.
C) ​It is not especially helpful in avoiding strategic blunders.
D) ​They better understand business situations in other parts of the world.

Question 52

Which of the following is NOT one of the four factors in Porter's "diamond" model?

A)​Firm strategy, structure, and rivalry.
B)​Relational contracting.
C) ​Factor endowments.
D) ​Domestic demand.

Question 53

How does bounded rationality affect strategic decision making?

A)​Managers pursue their interests and make choices within the formal and informal constraints in a given institutional framework.
B)​Relying on informal connections as a strategy is only relevant for firms in emerging economies.
C) ​Only with prior experience can managers of multinationals make rational strategy decisions.
D) ​Bounded rationality has no effect on decision making.

Question 54

Which are true regarding informal constraints?

A)When formal institutional constraints fail, informal constraints tend to fail as well.
B)Following the collapse the former Soviet Union, informal constraints were unable to facilitate growth of entrepreneurial firms.
C) Even in developed economies, the best-connected firms can reap significant benefits.
D) All of the above.

Question 55

How do institutions reduce uncertainty?

A)Ethical contracting.
B)Arm's-length transaction with third party enforcement.
C) Transaction costs.
D) Opportunism.

Question 56

Which of the following statements about institutional transitions is TRUE?

A)​Without relational contracting, institutional transitions cannot be made.
B)​Arm's-length transactions with third-party enforcement are the most effective approach to institutional transitions.
C) ​Institutional transitions are widespread in the world, especially in emerging economies.
D) ​The nature of institutional frameworks is unrelated to strategic decision making during transitions.

Question 57

In Porter's diamond model, factor endowments refer to:

A)​Domestic economy demand for products and services.
B)​Related and supporting industries.
C) ​Firm strategy and structure.
D) ​Inputs such as land, water, and people.

Question 58

Which of the following statements about strategy and institutions is TRUE?

A)​When formal institutional constraints fail, informal constraints tend to fail as well.
B)​Institutions are little more than background conditions to strategic decisions.
C) ​The institution-based view focuses on the dynamic interaction between institutions and firms, and considers strategic choices the outcome of such interaction.
D) ​The institutional similarities between developed and emerging economies have propelled the institution-based view to the forefront of strategy discussions.

Question 59

According to ___________ culture is the "Collective programming of the mind which distinguishes the members of one group or category of people from another."

A)Porter
B)Hofstede
C) North
D) Scott

Question 60

The cognitive pillar that supports informal institutions does so through:

A)​The way in which values and norms of the relevant players influence firm behavior.
B)​The taken-for-granted values and beliefs that guide individual and firm behavior.
C) ​The way in which laws and regulations influence firm behavior.
D) ​Formal institutions.

Question 61

Which of the following is descriptive of ethical imperialism?​

A)​Ethical standards can and should vary significantly around the world.
B)​It ascribes to the cliché "When in Rome, do as the Romans do."
C) ​A single set of ethics applies worldwide.
D) ​Good ethics are a way to achieve good profits.

Question 62

Which tends to be true of masculine cultures?

A)May have a relative advantage in small-scale, customized manufacturing.
B)May be at a disadvantage in making products efficiently, well and fast.
C) Stereotypical manager is decisive.
D) Stereotypical manager is accustomed to seeking consensus.

Question 63

Which of the following is descriptive of ethical relativism?

A)​Ethical and unethical behaviors are universally agreed upon for the most part.
B)​Ethical standards vary significantly around the world.
C) ​It contradicts the cliché "When in Rome, do as the Romans do."
D) ​Ethics is an instrument to impose the values of the elite on the masses.

Question 64

Ethical imperialism is best expressed by which of the following:

A)"When in Rome, do as the Romans do."
B)"There is only one set of Ethics, and we have it!"
C) "Respect for human dignity and basic rights should be the absolute, minimal ethical threshold for ALL operations around the world."
D) "Ignore corruption."

Question 65

The Foreign Corrupt Practices Act (FCPA) bans:

A)Bribery to American officials by companies based in other countries.
B)Bribery to foreign officials by companies based in the United States.
C) Bribery to all officials everywhere by companies based anywhere.
D) Bribery to foreign officials by companies based overseas.

Question 66

The Foreign Corrupt Practices Act passed in 1977 in the United States:

A)Gave U.S. companies a distinct advantage in conducting business with companies around the globe.
B)Makes no exceptions to the prohibition against bribery of foreign officials.
C) Means that U.S. firms exhibit systematically lower levels of corruption than other OECD firms.
D) Originally had little normative or cognitive support despite its regulatory "teeth."

Question 67

Which of the following is TRUE regarding cultures and strategic choices?

A)Managers in high power distance countries have a greater penchant for decentralized authority.
B)Solicitation of subordinate feedback and participation is a sign of weak leadership in high power distance countries.
C) Individualistic cultures prefer more informal contractual safeguards in alliances than collectivistic cultures.
D) Managers in low uncertainty avoidance countries place a high premium on job security and retirement benefits.

Question 68

In regards to individualism versus collectivism:

A)Collectivists never discriminate against out-group members and may be more opportunistic when dealing with in-group members.
B)Individualists make more distinction between in-group and out-group membership.
C) Individualists are more opportunistic when dealing with in-group members.
D) Collectivists may view social interactions/activities as unessential and wasteful of resources.

Question 69

Long-term orientation is best defined as:

A)The degree of social inequality.
B)The identity of an individual is not based on the identity of his or her collective group.
C) Emphasis on perseverance and savings.
D) The extent to which people accept ambiguous situations.

Question 70

Managers who strive to show respect for institutional context:

A)​Can ignore codes of conduct when outside the culture where they apply.
B)​Can work to find guidelines that accommodate cultural differences.
C) ​Cannot accept gifts from business associates.
D) ​Cannot make exceptions to codes of conduct that ban bribery.

Question 71

What is the benefit of formal, rule-based, impersonal exchange with third-party enforcement (often termed arm's-length transaction) versus informal institutions? Why can't we assume that formal institutions are inherently better than informal ones? How do formal and informal institutions complement each other?

Question 72

What are the "pillars" that are important in supporting formal and in formal institutions and how do they interact?

Question 73

Which best defines an accommodative strategy?

A)Firms do not feel compelled to act unless faced with a disaster or public outcry.
B)Denial is the first line of defense.
C) Focus on regulatory compliance, firm fights demand for changes unless they are regulatory.
D) Organizational norms emerge to accept responsibility for actions - cognitive beliefs/values that promote ethical choices are internalized.

Question 74

When it comes to taking action, a savvy strategist will:

A)​Follow the advice "When in Rome, do as the Romans do."
B)​Do "homework" to understand the formal and informal institutions that govern firm behavior.
C) ​Seek to share the values held by others of that country.
D) ​Realize that strategy is, like ethics, a game that is played like a musical instrument.

Question 75

Individualism is best defined as:

A)The degree of social inequality.
B)The identity of an individual is not based on the identity of his or her collective group.
C) Sex role differentiation.
D) The extent to which people accept ambiguous situations.

Question 76

A company realizes one of its products could potentially have a defective part. Although no problems have been reported, the company recalls the product to check for and if necessary replace the part in question. This company is using a _________ strategic response to its ethical challenge.

A)​Reactive.
B)​Positive.
C) ​Accommodative.
D) ​Proactive.

Question 77

Which is the instrumental view regarding motivation to become ethical?

A)Jump on the "bandwagon" to appear more legitimate without becoming more ethical.
B)Be self-motivated to "do it right" regardless of social pressures.
C) Good ethics are a way to achieve good profits.
D) Ethics is an instrument to impose the values of the elite on the masses.

Question 78

Which of the following is NOT considered one of the strategic responses to ethical challenges a firm may face?

A)​Reactive.
B)​Positive.
C) ​Accommodative.
D) ​Proactive.

Question 79

The norms, principles and standards of conduct that govern behavior:

A)Are an important part of national culture but not organizational culture.
B)Are private matters and not issues for formal institutions.
C) Have a substantial overlap with what is illegal.
D) Are sometimes ignored in the case of unwritten guidelines for ethical conduct.

Question 80

Although it has been suggested that firms in general may prefer to do business with countries that have shorter cultural distances, which of the following arguments can be made against this assumptions?

A)​Critics point out that a number of findings are consistent with the cultural distance hypothesis.
B)​Cultural distance, while important, is only one of many factors to consider.
C) ​Cultural distance can be replaced by institutional distance.
D) ​Institutional distance exaggerates cultural distance.