Introduction to International
Business
David J. Boggs, Ph.D.
Political, Legal, and Ethical
Environment
Functions of a Good
Government
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Protect liberty and promote welfare
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Provide public goods
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Freedom, safety, general well-being
Parks, defense, infrastructure
Handle market failures and externalities
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Monopolies, pollution
Political Rights
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Fair, competitive elections
Power for elected representatives
Freedom and ability to organize
Safeguard rights of minorities
Civil Liberties
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Freedom of the press
Freedom of speech
Freedom of movement
Freedom of organization
Religious freedom
Personal social freedoms
Equal rights under the law
Freedom from government corruption or
indifference
Totalitarianism
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High-control government, not supported
by the people, that does not permit
dissent
Theocratic or secular
May be friendly or unfriendly to
business
IB Political Concerns
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Terrorism, kidnapping,
crime
Traditional hostilities
Secular or religious
totalitarianism
Nationalization,
expropriation,
confiscation
Regulations and red
tape
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Corruption
Poor relations with
neighbors
Instability, volatility, or
frequent changes in
government
Jingoism (extreme
nationalism) or attitudes
hostile towards
foreigners
Country Risk Assessment
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Political instability
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Social instability
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Racial, ethnic, religious, socioeconomic
Economic instability
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Laws, political parties, bureaucracy
Inflation, debt, trade barriers, taxes
War, revolution, civil disturbances
Sources of Country Risk
Information
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Internally generated
Consultants
International organizations
Governments
Internet
MNC/Government Bargaining
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Political, legal, and economic situations
lead governments to bargain with MNCs
MNCs bargaining chips
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Jobs, technology, money, capital, taxes,
management skills, training, development
Governments bargaining chips
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Markets, labor, natural resources,
technology, regulations, tax rates, location
Legal Environment
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A countries laws and regulations, and
how they are enforced
Identify or describe United States laws
that affect businesses
The Legal Environment
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Labeling
Testing
Taxes and tariffs
Quotas
Advertising
Ownership
Standards
Price and wage controls
Antitrust
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Intellectual property
Currency exchange
Export requirements
Profit remission
Customs requirements
Labor
Product liability
Safety
Legal Structures
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Common law
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Civil law
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France, Germany
Theocratic law
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United States, United Kingdom
Saudi Arabia, Iran
Communist and other
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China, North Korea
Tax Laws
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Revenue and non-revenue purposes
Income, VAT, sales, property, tariffs,
corporate, capital gains, unitary
Incentives, exemptions, and credits
Double taxation and tax treaties
Tax avoidance
Anti-Competitive Practices
Laws
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Monopolies, price fixing, market sharing
USA – Antitrust laws
EU – Restrictive trade practices laws
Japan – Fair Trade Commission
Other countries and regions
Laws and enforcement vary across
countries
Intellectual Property Laws
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Patents, trademarks, trade names,
trade secrets, copyrights
Software, music, movies, books,
fashion, pharmaceuticals
Technology transfer and diffusion occurs
through employee transfer, industrial
espionage, reverse engineering,
publications, etc
Legal Dispute Resolution
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Home or host country law
Arbitration or mediation
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Speedy, cheap, trustworthy, confidential
UN or WTO
Determined by contract or location
United States Laws
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Antitrust applied internationally
National rather than territorial tax
jurisdiction
Foreign Corrupt Practices Act
distinguishes between grease and
bribes
Antiboycott Law
Cuba
Ethics and Corporate Social
Responsibility
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Behavior consistent with standards of
what is right or moral
Universal versus relative ethics
CSR is going beyond what laws require
to address concerns or needs of various
stakeholders
Summary
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Good governments protect political and civil liberties
of citizens
Some countries are more risky than others and
international companies generally prefer to operate in
less risky countries
MNCs gather political risk information through
governments, international organizations,
consultants, and internal research
Common legal systems include civil law, common
law, theocratic law, and secular totalitarianism
Tax, antitrust, and intellectual property laws are
examples of laws important to MNCs