This chapter has reviewed how the political, economic, and legal systems of different countries vary. The potential benefits, costs, and risks of doing business in a country are a function of its political, economic, and legal systems. More specifically:

1. Political systems can be assessed according to two dimensions: the degree to which they emphasize collectivism as opposed to individualism, and the degree to which they are democratic or totalitarian.

2. Collectivism is an ideology that views the needs of society as being more important than the needs of the individual. Collectivism translates into an advocacy for state intervention in economic activity and, in the case of communism, a totalitarian dictatorship.

3. Individualism is an ideology that is built upon an emphasis of the primacy of individual's freedoms in the political, economic, and cultural realms. Individualism translates into an advocacy for democratic ideals and free market economics.

4. Democracy and totalitarianism are at different ends of the political spectrum. In a representative democracy, citizens periodically elect individuals to represent them and political freedoms are guaranteed by a constitution. In a totalitarian state, political power is monopolized by a party, group, or individual, and basic political freedoms are denied to citizens of the state.

5. There are four broad types of economic system: a market economy, a command economy, a mixed economy, and a state-directed economy. In a market economy, prices are free of controls and private ownership is predominant. In a command economy, prices are set by central planners, productive assets are owned by the state, and private ownership is forbidden. A mixed economy has elements of both a market economy and a command economy. A state-directed economy is one in which the state plays a significant role in directing the investment activities of private enterprise through "industrial policy" and in otherwise regulating business activity in accordance with national goals.

6. Differences in the structure of law between countries can have important implications for the practice of international business. The degree to which property rights are protected can vary dramatically from country to country, as can product safety and product liability legislation and the nature of contract law.

7. The rate of economic progress in a country seems to depend on the extent to which that country has a well-functioning market economy in which property rights are protected.

8. Many country are now in a state of transition. There is a marked shift away from totalitarian governments and command or mixed economic systems and toward democratic political institutions and free market economic systems.

9. It is not clear, however, that we are witnessing the emergence of a universal global civilization based on democratic institutions and free market capitalism. The bipolar world of the Cold War era may ultimately be replaced by a multi-polar world of ideologically divergent civilizations.

10. The attractiveness of a country as a market and/or investment site depends on balancing the likely long-run benefits of doing business in that country against the likely costs and risks.

11. The benefits of doing business in a country are a function of the size of the market (population), its present wealth (purchasing power), and its future growth prospects. By investing early in countries that are currently poor but are nevertheless growing rapidly, firms can gain first-mover advantages that will pay back substantial dividends in the future.

12. The costs of doing business in a country tend to be greater where political payoffs are required to gain market access, where supporting infrastructure is lacking or underdeveloped, and where adhering to local laws and regulations is costly.

13. The risks of doing business in a country tend to be greater in countries that are (1) politically unstable, (2) subject to economic mismanagement, and (3) lacking a legal system to provide adequate safeguards in the case of contract or property rights violations.

14. Country differences give rise to several ethical dilemmas. These including (1) should a firm do business in a repressive totalitarian state, (2) should a firm conform to its home product, workplace, and environmental standards when they are not required by the host country, and (3) should a firm pay bribes to government officials to gain market access?