1. Introduction to International Business
David J. Boggs, Ph.D.
Political, Legal, and Ethical Environment

2. Functions of a Good Government
Protect liberty and promote welfare
Freedom, safety, general well-being
Provide public goods
Parks, defense, infrastructure
Handle market failures and externalities
Monopolies, pollution

3. Political Rights Fair, competitive elections
Power for elected representatives
Freedom and ability to organize
Safeguard rights of minorities

4. Civil Liberties 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

5. Totalitarianism
High-control government, not supported by the people, that does not permit dissent
Theocratic or secular
May be friendly or unfriendly to business

6. IB Political Concerns Terrorism, kidnapping, crime
Traditional hostilities
Secular or religious totalitarianism
Nationalization, expropriation, confiscation
Regulations and red tape
Corruption
Poor relations with neighbors
Instability, volatility, or frequent changes in government
Jingoism (extreme nationalism) or attitudes hostile towards foreigners

7. Country Risk Assessment
Political instability
Laws, political parties, bureaucracy
Social instability
Racial, ethnic, religious, socioeconomic
Economic instability
Inflation, debt, trade barriers, taxes
War, revolution, civil disturbances

8. Sources of Country Risk Information
Internally generated
Consultants
International organizations
Governments
Internet

9. MNC/Government Bargaining
Political, legal, and economic situations lead governments to bargain with MNCs
MNCs bargaining chips
Jobs, technology, money, capital, taxes, management skills, training, development
Governments bargaining chips
Markets, labor, natural resources, technology, regulations, tax rates, location

10. Legal Environment
A countries laws and regulations, and how they are enforced
Identify or describe United States laws that affect businesses

11. The Legal Environment Labeling Testing Taxes and tariffs Quotas
Advertising
Ownership
Standards
Price and wage controls
Antitrust
Intellectual property
Currency exchange
Export requirements
Profit remission
Customs requirements
Labor
Product liability
Safety

12. Legal Structures Common law Civil law Theocratic law
United States, United Kingdom
Civil law
France, Germany
Theocratic law
Saudi Arabia, Iran
Communist and other
China, North Korea

13. Tax Laws 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

14. Anti-Competitive Practices Laws
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

15. Intellectual Property Laws
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

16. Legal Dispute Resolution
Home or host country law
Arbitration or mediation
Speedy, cheap, trustworthy, confidential
UN or WTO
Determined by contract or location

17. United States Laws Antitrust applied internationally
National rather than territorial tax jurisdiction
Foreign Corrupt Practices Act distinguishes between grease and bribes
Antiboycott Law
Cuba

18. Ethics and Corporate Social Responsibility
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

19. Summary
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