IBT FINAL L3

APPROACHES TO SOCIAL RESPONSIBILITY
INTERNATIONAL BUSINESS TRADE a) OBSTRUCTIONIST STANCE

- Do as little as possible to address social or environmental
L3: ETHICS AND SOCIAL RESPONSIBILITY IN INTERNATIONAL
problems
BUSINESS
- Deny or avoid responsibility
ETHICAL BEHAVIOR – usually refers to behaviour that conforms to b) DEFENSIVE STANCE
generally accepted social norms. - Do what is required legally but nothing more
- Corporate responsibility is to generate profit
ETHICAL GENERALIZATIONS
c) ACCOMMODATIVE STANCE
❖ Individuals have their own personal belief systems. - Meet ethical and legal requirements
❖ People from the same cultural context will tend to hold similar - Agree to participate in social programs
beliefs. - Match contributions y employees
❖ Behaviors can be rationalized. - Respond to requests from non-profits
❖ Circumstances affect adherence to belief systems. - No pro active behavior to seek such opportunities
❖ National culture is intertwined with ethics. d) PROACTIVE STANCE
- Strong support of social responsibility
- Viewed as citizens of society
- Seek opportunities to contribute
MANAGING SOCIAL RESPONSIBILITY
IMPLEMENTING SOCIAL RESPONSIBILITY
❖ LEGAL COMPLIANCE
❖ ETHICAL COMPLIANCE
❖ PHILANTHROPIC GIVING
INFORMAL DIMENSIONS OF SOCIAL RESPONSIBILITY
❖ LEADERSHIP
❖ ORGANIZATIONAL FLOW
CODE OF ETHICS ❖ WHISTLE BLOWING
- Written statements of the values and ethical standards that guide CORPORATE SOCIAL AUDIT
the firms action.
❖ Tool for the evaluation of social responsibility effectiveness
EXAMPLE: ACCEPTABILITY OF BRIBERY
❖ Formal and through analysis
Acceptable Unacceptable ❖ Conducted by task force
Russia Australia
China Sweden STEPS IN CORPORATE SOCIAL AUDIT
Taiwan Switzerland
South Korea Austria
AREAS OF SOCIAL RESPONSIBILITY
1. ORGANIZATIONAL STAKEHOLDERS
2. NATURAL ENVIRONMENT
3. GENERAL SOCIAL WELFARE
REGULATING INTERNATIONAL ETHICS AND SOCIAL

RESPONSIBILITY
➢ Foreign Corrupt Practices Act (FCPA)

➢ Alien Tort Claims Act
➢ International Labor Organization (ILO)
➢ Anti Bribery Convention of the Organization for Economic
Cooperation and Development
INTERNATIONAL TRADE AND INVESTMENT
Trade: voluntary exchange of goods, services, assets, or money between

one person or organization and another.
International Trade: trade between residents of two countries.
Why Does International Trade Occur?
• Both parties to the transaction benefit

• Exports spark additional economic activity
• Improve competitiveness Classical Country-Based Trade Theories: Comparative Advantage
David Ricardo’s Comparative Advantage Theory
Classical Country-Based Trade Theories
Early Country-Based Theories
▪ Focused on the individual country

▪ Useful for describing trade in commodities
▪ Price is an important component of the customer’s purchase
decision
Classical Country-Based Trade Theories: Comparative Advantage
Modern Firm-Based Theories
Lessons of the theory of comparative advantage:
▪ Focus on the firm’s role in promoting international trade
▪ Useful in describing patterns of trade in differentiated goods • You are better off specializing in what you do relatively best
▪ Brand Name is an important component of the customer’s • Produce (and export) those goods and services you are relatively
purchase decision best able to produce
Classical Country-Based Trade Theories: Mercantilism • Buy other goods and services from people who are relatively
better at producing them than you are
▪ Gold and Silver
▪ Increased Exports Classical Country-Based Trade Theories: Relative Factor
▪ Reduced Imports Endowments
▪ Neomercantilistsor Protectionist Heckscher-Ohlin: Theory Pattern of Comparative Advantage
Classical Country-Based Trade Theories: Absolute Advantage Differences in relative factor endowments
Adam Smith attacked the intellectual basis of mercantilism • Export products that use relatively abundant factors of
• Weakens a country production
• Squanders a country’s resources • Import products that need relatively scarce factors of production
• Reduce a country’s wealth Classical Country-Based Trade Theories: Relative Factor
Endowments-Leontief Paradox
Smith advocated free trade among countries
• Enlarges a country’s wealth
Adam Smith’s Absolute Advantage Theory
Modern Firm-Based Trade Theories: Theoretical Development
• Growing importance of MNCs in the postwar international

• France has an absolute advantage in the production of wine economy
• Japan has an absolute advantage in the production of clock • Inability of the country-based theories to explain and predict the
radios existence and growth of intra-industry trade
• Trade: both will be better off
• Failure of Leontief and other researchers to empirically validate
Heckscher-Ohlin theory
Summary of Major Theories of International Trade
Modern Firm-Based Trade Theories: Vernon’s Product Life Cycle
Theory
Overview of International Investment: Types of International

investments
Modern Firm-Based Trade Theories: Linder’s Country Similarity
Theory
Modern Firm-Based Trade Theories: New Trade Theory
• Incorporates the impact of economies of scale on trade in

differentiated goods.
• Predicts that intraindustry trade will be commonplace
Obtaining a sustainable competitive advantage:
• Owning Intellectual Property Rights

• Investing in Research and Development
• Achieving Economies of Scope
• Exploiting the Experience Curve
Modern Firm-Based Trade Theories: Porter’s Theory of National

Competitive Advantage

IBT FINAL L3

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APPROACHES TO SOCIAL RESPONSIBILITY

INTERNATIONAL BUSINESS TRADE a) OBSTRUCTIONIST STANCE

MANAGING SOCIAL RESPONSIBILITY

IMPLEMENTING SOCIAL RESPONSIBILITY

INFORMAL DIMENSIONS OF SOCIAL RESPONSIBILITY

AREAS OF SOCIAL RESPONSIBILITY

REGULATING INTERNATIONAL ETHICS AND SOCIAL

➢ Foreign Corrupt Practices Act (FCPA)

Trade: voluntary exchange of goods, services, assets, or money between

International Trade: trade between residents of two countries.

Why Does International Trade Occur?

• Both parties to the transaction benefit

David Ricardo’s Comparative Advantage Theory

Classical Country-Based Trade Theories

Early Country-Based Theories

▪ Focused on the individual country

• Enlarges a country’s wealth

Adam Smith’s Absolute Advantage Theory

Modern Firm-Based Trade Theories: Theoretical Development

• Growing importance of MNCs in the postwar international

Overview of International Investment: Types of International

Modern Firm-Based Trade Theories: New Trade Theory

• Incorporates the impact of economies of scale on trade in

Obtaining a sustainable competitive advantage:

• Owning Intellectual Property Rights

Modern Firm-Based Trade Theories: Porter’s Theory of National

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