IMF conditionally:

Restrictions placed on economic policies of countries receiving IMF loans.

Import of the services of capital:

Payments that country's residents make on capital supplied by foreigners.

Import Quota

The fixed amount of goods that may be imported.

Import quota

A direct restriction on the quantity of a good that can be imported into a country.

Import tariff:

Tax levied on goods as they enter a country.

Importing:

Buying products made in other countries for use or resale in one's own country.

Import-substitution policy:

Economic development strategy that relies on the stimulation of domestic manufacturing firms by erecting barriers to imported goods.

Imports

Commodities or services bought from foreign countries.

Inc.:

Abbreviation for incorporation, meaning that the liability of the company's owners is limited to the extent of their investments if the company fails or encounters financial or legal difficulties.

Income distribution:

Relative numbers of rich, middle-class, and poor residents in a country.

Income tax:

A tax levied on individual or corporate income.

Inconvertible currencies:

Currencies that are not freely traded because of legal restrictions imposed by the issuing country or that are not generally accepted by foreigners in settlement of international transactions; also called soft currencies.

Independent regulatory commission:

An autonomous unit of the U.S. government that deals with a specific industry or field of activity, often combining quasi legislative, judicial, and administrative functions.

Indirect exchange rate:

Price of the home currency in terms of the foreign currency; also called indirect quote.

Indirect exporting:

Sales of a firm's products to a domestic customer, which in turn exports the product, in either its original from or a modified form.

Indirect quote:

See indirect exchange rate.

Individualism

An emphasis on the importance of guaranteeing individual freedom and self-expression.

Individualism:

Cultural belief that the person comes first.

Industrial democracy:

System based on the belief that workers should have a voice in how businesses are run.

Industrial democracy:

When workers participate in the -management of companies. See also co-determination.

Industrial policy:

Governmental actions affecting, or seeking to affect, the sectoral composition of the economy by influencing the development of particular industries.

Industrial policy:

Economic development strategy in which a national government identifies key domestic industries critical to the county's economic future and then formulates policies that promotes the international competitiveness of these industries.

Industrial Policy:

Selective government programs to create or revitalize particular industries or companies, usually so they can compete internationally.

Industrial products:

Goods and services sold primarily for use by organizations.

Industrial Revolution:

The time countries changed their manufacturing methods from individual production by hand to factory production using machines. Also see industrialization.

Industrial targeting:

The selection, by a national government, of industries important to the next stage of that nation's economy, and encouragement of their development through explicit policy measures. A frequent goal of such targeting is competitiveness in export markets.

Industrialization:

The development of modern manufacturing industries, usually as a conscious government plan; also see economic development.

Infant industry argument

New industries in developing countries must be temporarily protected from international competition to help them reach a position where they can compete on world markets with the firms of developed nations.

Infant industry argument:

Argument in favor of governmental intervention in trade: a nation should protect fledgling industries for which the nation will ultimately possess a comparative advantage.

Inflation

A period when purchasing power of a monetary unit is falling.

Informal management network:

Group of managers from different parts of the world who are connected to one another in some way.

Information system:

Methodology created by a firm to gather, assemble, and provide data in a form or forms useful to managers.

Information:

Data in a form that is of value to a manager.

Infrastructure:

The physical foundation on which a community's economy is built and public services delivered, and that weaves it together with other economies. Also called social overhead capital.

Initiative:

The mechanism by which citizens can petition to present a measure directly to the voters or to the legislature.

Injury:

The requirement, under GATT, that an industry seeking trade relief establish that it has been hurt by foreign competition. In the United States, a finding of injury has always been required for escape clause relief, and since 1979 for the bulk of CVD and antidumping cases as well.

Insider trading:

The illegal practice of buying and selling shares based on information that is not available to the public.

Institutional Agenda

The composite of public policy issues that, at any particular time, have reached the action stage of consideration by government.

Integrating mechanisms

Mechanisms for achieving coordination between sub-units within an organization.

Intellectual property

Products of the mind, ideas (e.g., books, music, computer software, designs, technological know-how). Intellectual property can be protected by patents, copyright, and trademarks.

Intellectual property rights:

Intangible property rights that include patents, copyrights, trademarks, brand names, and trade secrets.

Intellectual property:

See TRIPs.

Interest groups:

Private organizations, united by common goals, that organize to lobby and influence public policy.

Interindustry trade:

International trade involving the exchange of goods produced in one industry in one country for goods produced in another industry in a different country.

Intermediaries:

Third parties that specialize in facilitating imports and exports.

Internal Revenue Service (IRS)

Federal agency within the Treasury Department that is responsible for administering and enforcing the internal revenue laws, except those relating to alcohol, tobacco, firearms, and explosives.

Internalization advantages:

Factors that affect the desirability of a firm's producing a good or service itself rather than relying on existing local firms to control production.

Internalization theory:

Theory stating that foreign direct investment occurs because of the high costs of entering into production or procurement contracts with foreign firms.

International Accounting Standards Committee (IASC)

Organization of representatives of 106 professional accounting organizations from 79 countries that is attempting to harmonize accounting standards across countries.

International Accounting Standards Committee (IASC):

International organization whose mission is to harmonize the national accounting standards used by various nations.

International Bank for Reconstruction and Development (IBRD):

Official name of the World Bank, which was established by the Bretton Woods agreement to reconstruct the war-torn economies of Western Europe and whose mission changed in the 1950s to aid the development of less developed countries.

International banking facility (IBF):

Entity of a U.S. bank that is exempted from domestic banking regulations as long as it provides only international banking services.

International business:

Business that engages in cross-border commercial transactions with individuals, private firms, and/or public sector organizations; term is also used to refer to cross-border transactions.

International Development Association (IDA):

World Bank affiliate that specializes in loans to less developed countries.

International division

Division responsible for a firm's international activities.

International Finance Corporation:

World Bank affiliate whose mission is the development of the private sector in developing countries.

International Fisher Effect

For any two countries, the spot exchange rate should change in an equal amount but in the opposite direction to the difference in nominal interest rates between countries.

International Fisher effect:

Observation that differences in nominal interest rates among countries are due to differences in their expected inflation rates.

International investments:

Capital supplied by residents of one country to residents of another.

International logistic:

Management functions associated with the international flow of materials, parts, supplies, and finished products from suppliers to the firm, between units of the firm itself, and from the firm to customers.

International marketing:

Extension of marketing activities across national boundaries; see also marketing.

International Monetary Fund (IMF)

Established by the Bretton Woods (1944) conference, this fund was designed to meet the requirements of international monetary cooperation.

International Monetary Fund (IMF)

International institution set up to maintain order in the international monetary system.

International Monetary Fund (IMF):

Agency created by the Bretton Woods Agreement to promote international monetary cooperation after World War II.

International Monetary Fund (IMF)

An international organization established in 1944 that provides funds needed for balance of payments to stabilize currencies.

International monetary system:

System by which countries value and exchange their currencies.

International operations management:

Transformation-related activities of an international firm.

International order cycle time:

Time between placement of an order and its receipt by the customer.

International service business:

Firm that transforms resources into an intangible output that creates utility for its customers.

International strategic management:

Comprehensive and ongoing management planning process aimed at formulating and implementing strategies that enable a firm to compete effectively internationally.

International strategy

Trying to create value by transferring core competencies to foreign markets where indigenous competitors lack those competencies.

International trade:

Voluntary exchange of goods, services, or assets between a person or organization located in one country and a person or organization located in another country.

International Trade Commission:

See US International Trade Commission.

International trading company:

Firm directly engaged in importing and exporting a wide variety of goods for its own account.

Interstate Commerce Commission (ICC)

Federal commission that regulates interstate surface transportation, including trains, trucks, buses, inland waterway and coastal shipping, freight forwarders, and express companies.

Intracorporate transfer:

Selling of goods by a firm in one country to an affiliated firm in another country.

Intraindustry trade:

Trade between two countries involving the exchange of goods produced by the same industry.

Investment:

Expenditure devoted to increasing or maintaining the economy's stock of capital.

Invisible hand:

The idea that the pursuit of profit in a free market leads to the material advantage of society as a whole.

Invoicing currency:

Currency in which an international transaction is invoiced.

Iron Law

Every act of government creates winners and- losers within the competitive sector of the economy.

Iron Triangle

A public policy coalition of institutions and individuals that is more or less fixed in its membership and focus.

Iron triangle:

A name for the steady, helpful relationships that often grow among a congressional committee or subcommittee, an administrative agency, and concerned interest groups.

Irrevocable letter of credit:

Letter of credit that cannot be changed without the consent of the buyer, the seller, and the issuing bank.

Issue attention cycle

The phases through which a public policy issue passes as it moves toward public visibility and prominence.

Jamaica Agreement:

return to top

Agreement among central bankers made in 1976, allowing each country to adopt whatever exchange rate system it wished.

Joint venture

A cooperative undertaking between two or more firms.

Joint venture:

Special form of strategic alliance created when two or more firms agree to work together and jointly own a separate firm to promote their mutual interests.

Joint venture:

An association of firms assembled to carry out a specific business project.

Junk bonds:

High-risk bonds often used to raise funds for corporate buyouts and takeovers.

Just-in-time (JIT)

Logistics systems designed to deliver parts to a production process as they are needed, not before.

Just-in-time (JIT) systems:

Systems in which suppliers are expected to deliver necessary inputs just as they are needed.

Kabuskiki kaisha (KK):

In Japan, term used to represent all limited-liability companies.

Keiretsu:

Family of Japanese companies, often centered around a large bank or trading company, having extensive cross-ownership of shares and interacting with one another as suppliers or customers.

Kennedy Round:

The popular name for the sixth round of trade negotiations under the aegis of the GATT, conducted during 1963-1967, which produced major cuts in tariffs.

Keynesian economics:

Analysis of the cause and consequence of aggregate spending and income, in which government compensates for deficiencies with deficit spending.

Labor Productivity:

return to top

Measure determined by dividing output by direct labor hours or costs; used to assess how efficiently an organization is using its workforce.

Lag strategy

Delaying the collection of foreign currency receivables if that currency is expected to depreciate.

Laissez-faire

Term that generally refers to the lack of governmental interference in the economy.

Laissez-faire:

The doctrine that the commercial affairs of society are best guided by the decisions of individuals, to the exclusion of government.

Land Ordinance of 1785

The first national K-12 education policy that under the Articles of Confederation required that land surveyed in the Northwest Territories be parceled out with a fixed amount of land allocated to the support of public education.

Law of one price

In competitive markets free of transportation cost and barriers to trade, identical products sold in different counties must sell for the same price when their price is expressed in terms of the same currency.

LBO (leverage buyout):

A group of investors led by management buys the stock of a publicly traded company and takes the company private, financed by loans in which the company's assets are pledged as collateral.

LDC:

A less developed country, with low average income and little industry.

Lead market

Market where new products are first introduced.

Lead strategy

Collecting foreign currency receivables early when a foreign currency is expected to depreciate, and paying foreign currency payables before they are due when a currency is expected to appreciate.

Leadership:

Use of noncoercive influence to shape the goals of a group or organization, to motivate behavior toward reaching those goals, and to help determine the group or organizational culture.

Leads and lags strategy:

Money management technique in which an MNC attempts to increase its holding of currencies and assets denominated in currencies that are expected to rise in value and to decrease its holdings of currencies and assets denominated in currencies that are expected to fall in value.

Lean production systems

Flexible manufacturing technologies pioneered at Toyota and now used in much of the automobile industry.

Learning effects

Cost savings from learning by doing.

Legal risk

The likelihood that a trading partner will opportunistically break a contract or expropriate intellectual property rights.

Leontief paradox:

Empirical finding that U.S. exports are more labor-intensive than U.S. imports, which is contrary to the predictions of the theory of relative factor endowments.

Leontief Paradox

The empirical finding that, in contrast to the predictions of the Heckscher-Ohlin theory, U.S. exports are less capital intensive than U.S. imports.

Letter of credit

Issued by a bank, indicating that the bank will make payments under specific circumstances.

Letter of credit:

Document issued by a bank promising to pay the seller if all conditions specified in the letter of credit are met.

Liberal democracy:

See democracy.

Liberal trade:

The policy or practice of reducing import barriers and expanding the volume of international trade.

Liberalism:

Originally, and in most of the world, the political theory of limited government and the supreme value of human or civil rights. For the economy, the theory thus implies restricting government's functions and trusting individuals to make most decisions. In the United States, however, liberalism has come to mean advocacy of government intervention in the economy, which in part is the opposite of its original meaning.

Licensee:

Firm that buys the rights to use the intellectual property of another firm.

Licensing

Occurs when a firm (the licensor) licenses the right to produce its product, use its production processes, or use its brand name or trademark to another firm (the licensee). In return for giving the licensee these rights the licensor collects a royalty fee on every unit the licensee sells.

Licensing:

Transaction in which a firm (called the licensor) sells the rights to use its intellectual property to another firm (called a licensee) in return for a fee.

Licensing:

Permission from government to do something that is otherwise against the law.

Licensor:

Firm that sells the rights to use its intellectual property to another firm.

Limited liability:

The legal separation of a corporation from its shareholders, which protects shareholders from being held fully personally responsible for the corporation's liabilities.

Lingua franca:

Common language.

Loan guarantee:

The practice of government promising to repay, in case of default, a private loan made for purposes deemed in the public interest.

Lobbying:

An effort to pass, defeat, or change the contents of legislative bills and other government decisions.

Local content requirement

A requirement that some specific fraction of a good be produced domestically.

Location advantages:

Factors that affect the desirability of host country production relative to home country production.

Location economies

Cost advantages from performing a value creation activity at the optimal location for that activity.

Locus of authority:

Where the power to make various decisions resides within the organization.

Logrolling:

Mutual aid among politicians with reciprocal support for each other's bills.

London Interbank Offer Rate (LIBOR):

Interest rate that London banks charge each other for short-term Eurocurrency loans.

Long-term portfolio investments:

Portfolio investments with maturities of more than one year.

Louvre Accord:

Agreement made in 1987 among central bankers to stabilize the value of the U.S. dollar.

Low-context culture:

Culture in which the words being spoken explicitly convey the speaker's message to the listener.

Ltd.:

Abbreviation used in the United Kingdom to indicate a privately held, limited liability company.

Maastricht Treaty

return to top

Treaty agreed to in 199 1, but not ratified until January 1, 1994, that committed the 12 member states of the European Community to a closer economic and political union.

Maastricht Treaty:

Common name given to the Treaty on European Union.

Macroeconomic policy:

Policy geared toward influencing the overall aggregates of the economy, such as employment, production, and the rate of inflation, through measures affecting the fiscal balance and the supply of money and credit.

Macropolitical risk:

Political risk that affects all firms operating within a country.

Make-or-buy decision:

Decision for an organization to either make its own inputs or buy them from outside suppliers.

Maker

Person or business initiating a bill of lading (draft).

Managed float:

Flexible exchange system in which government intervention plays a major role in determining exchange rates; also called a dirty float.

Managed trade:

See fair trade.

Managed-float system

An exchange rate system in which some currencies are allowed to float freely, but the majority are managed in some way by government intervention.

Management contract:

Agreement whereby one firm provides managerial assistance, technical expertise, or specialized services to a second firm for some agreed-upon time in return for a fee.

Management networks

A network of informal contracts between individual managers.

Manufacturers' agents:

Agents who solicit domestic orders for foreign manufacturers, usually on a commission basis.

Manufacturers' export agents:

Agents who act as an export department for domestic manufacturers, selling those firms' goods in foreign markets.

Maquiladoras:

Mexican factories located along the U.S.-Mexico border that receive preferential tariff treatment.

Market economy

The allocation of resources in determined by the invisible hand of the price system.

Market failure:

The inability of private transactions to provide certain goods or to operate with mutually satisfactory results.

Market imperfections

Imperfections in the operation of the market mechanism.

Market makers

Financial service companies that connect investors and borrowers, either directly or indirectly.

Market power

Ability of a firm to exercise control over industry prices or output.

Market pricing:

Customization of prices on a market-to-market basis to maximize profits.

Market pricing policy:

Pricing policy under which prices are set on a market-by-market basis.

Market socialism:

Form of socialism that allows significant private ownership of resources.

Market:

A system of voluntary exchange that generates prices to decide how to allocate scarce resources.

Marketing alliance:

Strategic alliance in which two or more firms share marketing services or expertise.

Marketing mix:

How a firm chooses to address product development, pricing, promotion, and distribution.

Marketing:

Process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives.

Marshall Plan:

Massive U.S. aid program following World War II; designed to help European nations rebuild themselves.

Materials management:

Part of logistics management concerned with the flow of materials into the firm from suppliers and between units of the firm itself.

Medicaid

Federal-state program that pays for medical care for the poor.

Medicare

The U.S. federal program that pays for health care services for the elderly and the disabled.

Medium:

Communication channel used by an advertiser to convey a message.

Mercantilism

An economic philosophy advocating that countries should simultaneously encourage exports and discourage imports.

Mercantilism:

Historically, an economic philosophy that equates national wealth with the accumulation of gold or other international monetary assets, and hence with running a trade surplus. In today's world, mercantilism refers to a belief that running a consistently positive trade balance contributes to a nation's economic strength and moral virtue, and also to policies aimed at this goal.