The Impact of National Institutions on Globalization

Abstract

There are many factors that influence the likelihood of success in global markets, but a critical first step in successfully navigating the global landscape is to understand the unique factors that make globalization so complex and challenging. As I described in chapter 2, managers ordinarily make a case for globalization by building financial models: generating detailed projections for revenues, costs, and profitability. However, most globalization analyses lack a thorough evaluation of how the institutional environments in the host country and the home country differ, and managers often do not sufficiently consider the risks those differences are likely to present to profitability projections. This chapter starts to unpack the institutional factors that should inform that kind of risk analysis.