Understanding the International Environment of Business

Ghemawat (2001)’s CAGE Framework

Institutional Differences

Three points to remember:

  • Institutions play a key role in reducing uncertainty
  • There are 2 core propositions underpinning an institution-based view of global business
  • Appreciate the differences among market economy, command economy, and mixed economy

Table of Contents

  • Introduction
  • Definitions
  • What do institutions do?
  • Debates and extensions
  • Conclusion

Introduction

Czech Mate

  • The Czech Mate case provides an opportunity to examine the causes and consequences of expropriation by an important insider in a weak institutional environment. Some of the important points (not an exhaustive list) are:

  • How insiders can expropriate value from shareholders in emerging markets when property rights are ill-defined?

  • How institutions and legal rules impact financing patterns and economic outcomes?

  • Should CME buy Zeleny's shares?

  • If CME does buy the shares, what should it be worried about? What else can CME do at this point?