Chapter 03 – International Institutions from an International Business Perspective
Answers to Questions
1. What are the characteristics of informal cognitive institutions and why are they of special significance
to international business managers?
Cognitive institutions use shared ideas to define reality by means of conceptual frameworks or schema.
Examples in the text included the supplier relationship contrast between the U.S. and Japan and in guanxi.
2. The UN may be best known for its peace-keeping missions, but it also has many agencies involved in
activities that directly impact business. Comment on the UN’s influence on a single trade transaction.
The transaction will differ by students. The important aspect here is that the answer reveal awareness of
the contributions to the trading infrastructure by the WTO, and beyond that, and at more subtle levels, the
3. Sovereign wealth funds and high reserves are held by many developing nations today, and they had
been the major market for IMF loans in the past. How might the IMF adjust to a world in which fewer
poor countries need their loans?
There are many other areas on which the IMF could focus, such as exchange rate stability, advice on
4. In your judgment, do bilateral trade agreements such as NAFTA and Mercosur undercut the WTO?
This is a debatable issue, a bit of a chicken and egg situation. Bilateral agreements may substitute for
5. When the U.S. Congress approved NAFTA, there was strong trade union and labor opposition. Do
you agree with labor’s opposition? Explain.
This question brings in trade theory as well as NAFTA knowledge. Although this is an opinion question,
6. Mercosur’s main trading partner is with the EU rather than the U.S. Why might this be the case?
3-2
Chapter 03 – International Institutions from an International Business Perspective
7. Why is OECD known as “the rich man’s club”? Does it impact only rich countries?
8. Using concepts from new institutional theory, describe two institutions covered in the chapter.
9. What impact can the EU have on businesses external to the EU?
10. Criticism of international institutions such as the UN or the EU often goes to sovereignty, the
authority of the state to govern itself. The argument is that the institution violates the sovereignty of the
nations. One of the counter-arguments to this assertion is that the benefits gained from joining the
international institution can be positive and outweigh the sacrifice in sovereignty. Give an example of
this counterargument, when the sacrifice of sovereignty is more than compensated for by the benefits
gained from membership, drawing on institutions we have reviewed.
Ch 3 Minicase Answer
Use of International Institutions: Setting Up a Company in Africa
globalEDGE Answers
Exercise 1
You work at a company that manufactures low-cost computers and is currently considering
entering India. Use the World Development Indicators (WDI) – the World Bank’s premier data
3-3
Chapter 03 – International Institutions from an International Business Perspective
compilation of data on development – to gather information on this country. Prepare a short
report focusing on the economic policy and external debt, education, and infrastructure of India
as it applies to your company’s product.
Answer
http://globaledge.msu.edu
Exercise 2
The Organization for Economic Co-operation and Development (OECD) publishes an Economic
Survey, approximately every two years, for each OECD country. Each survey provides OECD’s
assessment and recommendations on the main economic challenges faced by the individual
country. Find the Economic Surveys of France, Italy, and the United Kingdom for the most
recent year. Summarize the key challenges facing each economy. Do you notice any similarities
among the countries in terms of the challenges they are facing?
Answer
http://globaledge.msu.edu
3-4