The document discusses the political, legal, and technological environment faced by international businesses. It describes how a country's political system, including its ideology and level of individualism versus collectivism, influences business management. Common forms of government like democracy and totalitarianism are outlined. The document also examines the legal foundations of different countries and principles of international law. Emerging technologies and their potential impacts on global business are briefly discussed.

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International
Management:
Culture, Strategy, and
Behavior
Part One: Environmental
Foundation
Chapter 2: The Political, Legal, and
Technological Environment
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Political Environment
The political system or system of government in a country greatly
influences how its people manage and conduct business.
• Underlying the governmental actions is the ideology of the beliefs,
values, behavior, and culture of the nation and its political system.
• A political system can be evaluated along two dimensions.
• The first dimension is the ideology of the system.
• The second measures the degree of individualism or collectivism.

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Ideologies
Adopters of individualism adhere to the philosophy that people should
be free to pursue economic and political endeavors without constraint.
• Government interest should not solely influence individual behavior.
Collectivism views the needs and goals of society at large as more
important than individual desires.
• Societal goals and the decision of how to keep people focused on
them differ greatly among national cultures.
Socialism is a moderate form of collectivism in which there is
government ownership of institutions, and profit is not the ultimate goal.
• Social democracy refers to a socialist movement that achieved its
goals through nonviolent revolution.

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Political Systems
In a democracy, the government
is controlled by the citizens.
• Directly or through elections.
• Cannot exist without at least a
two-party system.
• They believe every citizen
should be involved in decision-
making processes.
• Individual freedoms are
secured.
In totalitarianism, one party
controls political and human life.
• Power is often maintained by
suppression.
• The most common form is
communism.
• Some parties govern based on
religious principles.
• “Right-wing” allows for some
economic (but not political)
freedoms.

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Figure 2-1: Summary of Arab Spring Uprisings
Access the text alternative for this image.
Source: Original graphic by Professor Jonathan Doh.

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Legal and Regulatory Environment
There are four foundations on which laws are based around the world.
• Islamic Law: derived from interpretation of the Qur’an and the
teachings of the Prophet Muhammad.
• Found in Islamic countries in the Middle East and Central Asia.
• Socialist Law: comes from the Marxist socialist system and continues
to influence regulations in former communist countries.
• Common Law: comes from English law and the foundation of the
legal system in the U.S., Canada, England, Australia, New Zealand,
and other nations.
• Civil or code law: derived from Roman law
• Found in non-Islamic and non-socialist countries such as France,
some countries in Latin America, and Louisiana in the U.S.

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Basic Principles of International Law
International law is less coherent than domestic law.
• Principle of sovereignty—governments can rule as they see fit.
• There are three types of jurisdictional principles.
• Nationality principle, territoriality principle, protective principle.
• Doctrine of comity—mutual respect for the laws, institutions, and
governments of other countries in jurisdiction over their own citizens.
• Act of state doctrine—acts of other governments are considered valid
by U.S. courts, even if such acts are illegal/inappropriate in the U.S.
• Countries may refuse admission of foreign citizens and impose
restrictions on their conduct, travel, lodgings, and business they may do.
• A forum for hearing and settling disputes is a principle of U.S. justice as
it applies to international law.

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Examples of Legal and Regulatory Issues
Specific laws and situations directly impact international business.
• Financial services regulations.
• The integrated nature of financial markets means a regulatory failure
in one jurisdiction can impact other jurisdictions.
• The Foreign Corrupt Practices Act (FCPA)—it is illegal to influence
foreign officials through personal payment or political contributions.
• Restrictive foreign bureaucracies are a big problem facing MNCs.
• Privatization of state-owned enterprises opens opportunities for MNCs.
• Countries use their legal and regulatory policies on international trade
to affect the international management environment.

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Technology in the Next Decade
The Internet
of Things.
Blockchain
technology.
AI and
Machine
Learning.
Robotics paired
with any of
these.

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Technological Environment and Global Shifts in Production
Technological advancements connect the world and aid in the increased
quality of products, information gathering, and R&D.
• Hunger and poor health care are worldwide
issues—biotechnology is working to raise
the standards.
• MNCs are trying to improve e-business
operations in B2C transactions.
• Developing economies are “leapfrogging”
telecommunications technology.
• In the future, technology has the potential to
displace employees in all industries.
With new
technological
advancement:
• Business costs
should decline.
• Productivity should
increase.
• Prices should go
down.

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