Chapter 14: Cross-country institutional differences and firm behaviour in a geopolitical environment
Some factors that explain the cross-country diversity in firm behaviour are the differences in cultural value systems, legal framework characteristics, the nature of the corporate ownership and control structure, the level of female participation in the labour market and the level of economic and financial sophistication. Country-specific determinants of economic and financial structure include the extent of creditors’ rights, the number of business start-up requirements, contract enforcement conditions, the ratio of market capitalization to GDP, the level of economic and financial development and the type of dividend tax system that is in place. These factors impact the modalities of business in a geopolitical world. Geopolitically, certain country-specific factors have the capacity to influence corporate behaviour both directly and indirectly, through their potential impact on firm-specific factors. Institutional differences between countries may therefore help to explain how different business practices determine corporate financial structures, internationalization strategies, innovation capacities, size and performance. The comprehensive framework for this research (Figure 14.1) takes the form of an empirical study to explore potential relationships between the different country-specific institutional environments which are inherent in the global marketplace, and incidental differences in the way firms conduct themselves in terms of their financial structure, internationalization processes, scale economies, innovation capacities and projects profitability.
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