Table 2.

1
Dimension Specifica on Implica on
1 The sustained rise in consumer Influences interest rates, living costs,
prices measured against a standard consumer confidence, and, ul mately,
level of purchasing power poli cal stability
2 Summary of an economy’s trade Indicates if a country has sufficient
and financial transac ons, as savings to pay for its imports as well as
conducted by individuals, if it produces enough income to finance
businesses, and government growth
agencies, with the rest of the world
3 General decline in prices, o en  Slows economic growth; an cipa ng
caused by a reduc on in the supply lower prices, consumers defer
of money or credit or declining purchases, thereby risking a
aggregate demand defla onary spiral
 Increases the real value of debt
4 Mul dimensional condi on  Persistent poverty destabilizes
whereby a person or community performance and constrains
lacks the essen als for a minimum poten al
standard of well-being and life  Creates stress points that challenge
civil society
5 The total of a state’s financial  Decreasing debt opens growth
obliga ons; measures what the opportuni es
government borrows from its  Growing debt signals increasing
ci zens, foreign organiza ons, austerity, rising taxes, and, if
foreign governments, and uncontrolled, debt crises that
interna onal ins tu ons impose poli cal, economic, and
social costs
6 The distribu on of income among a Equality stabilizes society and opens
na on’s popula on; es mated by opportuni es; inequality promotes
the GINI coefficient debt, stress, and risks
7 The share of out-of-work ci zens  People gain fully employed tes fy to
ac vely seeking employment for the competency of policymakers to
pay rela ve to the total civilian sustain a produc ve economy
labor force  Persistent unemployment indicates
government inep tude
 Table 2.2
Legal Explana on/examples
concern
1 In the event of a dispute, determining which country’s legal system takes precedence
is the ma er of legal jurisdic on. Expectedly, each company in a contract dispute
claims its laws apply in the belief that it will receive favorable treatment from its home
courts. This situa on is especially pressing when an MNE from a rule of law system,
say Canada, has legal difficul es in a rule of man environment, say Bolivia. Moreover,
intricate ownership pa erns coupled with interdependent opera ons spanning
mul ple countries o en make it difficult to determine legal jurisdic on. Hence, MNEs
specify a choice-of-law clause in contracts that s pulates whose laws, when necessary,
govern dispute resolu on. Similarly, contracts usually include arbitra on provisions,
whereby companies agree to resolve poten al disputes outside of court through
agencies such as the Interna onal Court of Arbitra on
2 The Danish toy maker LEGO noted consumers’ fear of the possible toxicity of plas c
toys made in China and did not open a factory there. Instead, Lego opened factories
in compara vely more expensive, but less worrisome, Mexico and Eastern Europe
3 Singapore, New Zealand, and the United States have flexible labor-regula on statutes.
China allows greater flexibility in hiring, firing, and se ng employment condi ons
(e.g., work hours, minimum wages, and benefits). In contrast, Angola, Belarus, India,
and Paraguay strictly regulate how companies terminate employees as well as require
generous severance payments. For instance, India’s na onal government specifies
nearly 60 labor laws, including its Industrial Disputes Act, which requires a company
employing 100 or more workers to obtain state permission before firing anyone, even
if it has hit hard mes. Meanwhile, India’s 28 states and 9 union territories enforce
many more laws.
4 The United Na ons Conven on on Contracts for the Interna onal Sale of Goods sets
guidelines for nego a ng and enforcing contracts. S ll, prac ces vary across legal
systems. Countries using a common law system, for instance, encourage precise,
detailed contracts, whereas a civil law system allows broader agreements. Similar
tendencies show up in contract-enforcement policies. Australia, Norway, and the
United Kingdom impose the fewest number of enforcement procedures. Burundi,
Angola, Bolivia, Cameroon, El Salvador, Mexico, and Panama require many. Hence,
Australia needs 402 days to enforce a contract, Bolivia, 591 days, and Cameroon, 800
days.
5  Russia imposes aggressive data localiza on laws that require data collected
electronically be processed and stored locally before being allowed to move beyond
its borders.
 India requires single-brand retail stores, like Apple or Nike, to source at least 30
percent of the local value of their goods from Indian firms.
 The United States’ Buy American Act requires its public agencies look first to
homemade products, then, if necessary, foreign alterna ves. Similarly, its Jones Act
requires that ships moving goods or people between U.S. ports be owned and
operated by ci zens of the United States.
6  Ireland, Japan, Canada, and Hong Kong, for instance, make shu ng down “fast”
(between four to eight months) and cheap (between 1 and 10 percent of the
estate).
 The situa on differs in developing countries. India’s lack of a comprehensive
bankruptcy code complicates dealing with creditors, officials, and courts, which in
turn discourages bankruptcy; about 25 percent of Indian creditors get their money
back when the typical company goes bust versus 77 percent in Europe and the
United States. Hence, fewer firms file for bankruptcy in India than in the West.
Bankruptcy in Indonesia, Vietnam, and Ecuador is slow (between five to eight years)
and expensive (between 10 and 30 percent of the estate).
7  Ma ers of jurisdic on complicate protec ng intellectual property rights (IPRs). A
U.S. patent, for example, establishes an IPR only in the United States and its
territories and possessions; it does not extend to other na ons. There’s no shortcut
to worldwide protec on - a company cannot register a “global” patent, trademark,
or copyright.
 Although an IPR sounds secure, enforcing it is difficult. For example, in the United
States, companies can go a er the makers and sellers, not users, of counterfeit
goods. Worldwide, governments claim to abide by these agreements and enforce
IPRs. However, pirates con nue counterfei ng popular, pricey, and vital products.
8  At the micro level, a Brazilian entrepreneur recalled his experience star ng his
company in his home country; obtaining authoriza ons, licenses, and permits from
seven different ministries took about 150 days. Subsequently, he launched a U.S.-
based business and noted that within a week I had formed an LLC (limited liability
corpora on), incorporated in Delaware, and set up bank accounts.
 India imposes a ba ery of regula ons on mul -brand foreign chains, such as
Walmart, Carrefour, and IKEA. They must operate as joint ventures, have no higher
than a 51 percent ownership share, direct at least half of their capital investments
into processing infrastructure, and open outlets only in ci es that have at least one
million residents