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Chapter 3: Legal, Technological, and Political Forces

Chapter 3: Legal, Technological, and Political Forces. International Business, 4 th Edition Griffin & Pustay. Chapter Objectives_1. Describe the major types of legal systems confronting international businesses

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Chapter 3: Legal, Technological, and Political Forces

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  1. Chapter 3:Legal, Technological, and Political Forces International Business, 4th Edition Griffin & Pustay ©2004 Prentice Hall

  2. Chapter Objectives_1 • Describe the major types of legal systems confronting international businesses • Explain how domestic laws affect the ability of firms to conduct international business • List the ways firms can resolve international business disputes ©2004 Prentice Hall

  3. Chapter Objectives_2 • Describe the impact of the host country’s technological environment on international business • Explain how firms can protect themselves from political risk ©2004 Prentice Hall

  4. The Legal Environment • Common Law • Civil Law • Religious Law • Bureaucratic Law ©2004 Prentice Hall

  5. Common Law • Based on wisdom of judges decisions on individual cases through history • Cases create legal precedents ©2004 Prentice Hall

  6. United States Canada Australia India New Zealand Barbados Saint Kitts Nevis Malaysia Countries Using Common Law ©2004 Prentice Hall

  7. Civil Law • Based on codification of what is and is not permissible • Originated in biblical times with the Romans • Reinforced by French Napoleonic code • Judge determines scope of evidence collected and presented ©2004 Prentice Hall

  8. Egypt’s legal system is a blend of English common law, the French Napoleonic code, and Islamic Law ©2004 Prentice Hall

  9. Religious Law • Based on the officially established rules governing faith and practice of a particular religion • Theocracy: country that applies religious law to civil and criminal conduct ©2004 Prentice Hall

  10. Bureaucratic Law • Legal system in communist countries and in dictatorships ©2004 Prentice Hall

  11. Laws Affecting International Business Transactions • Sanctions • Embargo • Extraterritoriality • Helms-Burton Act ©2004 Prentice Hall

  12. Laws Directed Against Foreign Firms • Nationalization • Expropriation • Confiscation • Privatization ©2004 Prentice Hall

  13. Advantages Greater selection Higher standards Job creation Tax benefits Technology transfers Disadvantages Competition Job loss Dependency on economic health of MNC Political power Impacts of MNCs on Host Countries: Economic/Political ©2004 Prentice Hall

  14. Dispute Resolution • Which country’s law applies? • In which country should the issue be resolved? • Which technique should be used to resolve the conflict? • How will the settlement be enforced? ©2004 Prentice Hall

  15. Conflict Resolution Techniques Litigation Arbitration Mediation Negotiation ©2004 Prentice Hall

  16. Principle of Comity • A country will honor and enforce within its own territory the judgments of foreign courts • Conditions of the principle: • Reciprocity is extended • Defendant is given proper notice • Judgment does not violate domestic statutes or treaty obligations ©2004 Prentice Hall

  17. Joint venture between Volkswagen and the Shanghai Automotive Industry Group ©2004 Prentice Hall

  18. Intellectual Property • Patents • Copyrights • Trademarks • Brandnames Intellectual property often forms the basis of a firm’s competitive advantage! ©2004 Prentice Hall

  19. International Treaties Protecting Intellectual Property Rights • International Convention for the Protection of Industrial Property Rights (i.e., the Paris Convention) • Berne Convention for the Protection of Literary and Artistic Works • Universal Copyright Convention • Trade-Related Intellectual Property Rights agreement ©2004 Prentice Hall

  20. Figure 3.2 Software Revenue Lost to Piracy ©2004 Prentice Hall

  21. Political Risk • Ownership risk • Operating risk • Transfer risk ©2004 Prentice Hall

  22. Expropriation Confiscation Campaigns against foreign goods Mandatory labor benefits legislation Civil wars Inflation Kidnappings, terrorist threats, and other forms of violence Repatriation Currency devaluations Increased taxation Table 3.1 Examples of Political Risks ©2004 Prentice Hall

  23. Basic Country Knowledge • Is the country a democracy or dictatorship? • Does country rely on free market or government controls? • Does government view foreign firms as positive influence? • Are firm’s customers private or public? • Does government act arbitrarily? • Is existing government stable? ©2004 Prentice Hall

  24. Insurance against Political Risks • Overseas Private Investment Corporation (OPIC) • Multilateral Investment Guarantee Agency (MIGA) ©2004 Prentice Hall

  25. Map 3.2 Countries’ Relative Political Riskiness, 2002 ©2004 Prentice Hall

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