Economic Institutions and Globalization

Abstract

In an ideal world, managers would simply engage in the wholesale transfer of products, services, operations, and business activities from the domestic market—where they are familiar with the various institutions—to a foreign market. Adopting such an approach is typically easier and more cost-effective—benefitting from what we refer to as “economies of scale and scope” in global markets—than recreating the business from scratch. In practice, however, managers often discover that it is difficult to conduct business in global markets in precisely the same way as in the domestic market. There are a host of impediments to transferring an existing domestic business model abroad.